Hi Michael--
Try using this for the command with the -c switch:
autoload _pubhtml::publish_hfile _pubhtml.acl;_pubhtml::publish_hfile('C:\work\TerraXML\test\Document1.html')
(but replace the hard-coded path there with your own desired output path).
The problem with using FileSaveAsHTML is that it assumes you're running in interactive mode so it tries to ask you about where to store the resulting file.
The _pubhtml package has a variety of functions related to HTML publishing, including publish_hfile(), which just generates the HTML file and saves it without generating any message boxes.
--Clay