You mislabeled the materials in Max, then when you compiled that scenario H2Tool cannot find the proper shaders because you are pointing to the wrong location, thus you get the error shader that is multi-colored. Everyone does this at first.
How to fix it? Fix your materials in 3DS Max, if you are using existing shaders then its simple, open the H2EK tutorial and search for the section on Materials, read it, learn it, use it.
Here are some example Max files you can study to see how I labeled my materials: http://www.monstrmoose.com/killsalone/Custom_Data_+_Tags/Data/scenarios/multi/
*When I say labeling the material; I mean not just the name of the material but what it says inside of the material, so select one, then go inside of it (we're talking from the Material Editor here). The tutorial should explain the rest and then when you study my Max files you can see some working examples.