configure: error: C compiler cannot create executables

[jxeon]

Sorry for yet another post but I seem to be running into losts of trouble.
I updated my xtools to 1.5 Running os x 10.3.9 1.33Mhz powerbook.
Some threads seem to suggest that the error in title was related to an older xtools, but the upgrade hasn't resolved this. I also have posted this at the garnome list as that's ultimately what I'm trying to get working. (They also recommended this forum)

[fetch] complete for libtool.
==> Running checksum on libtool-1.5.14.tar.gz
049bf67de9b0eb75cd943dafe3d749ec download/libtool-1.5.14.tar.gz
file libtool-1.5.14.tar.gz passes checksum test!
==> Running checksum on workaround-la-files.diff
10513fe2e66e7a4862af4e5df176d191 download/workaround-la-files.diff
file workaround-la-files.diff passes checksum test!
[checksum] complete for libtool.
install -d work/main.d
==> Extracting download/libtool-1.5.14.tar.gz
[extract] complete for libtool.
==> Applying patch download/workaround-la-files.diff
patching file ltmain.in
[patch] complete for libtool.
grep: invalid option -- o
Usage: grep [OPTION]... PATTERN [FILE]...
Try `grep --help' for more information.
grep: invalid option -- o
Usage: grep [OPTION]... PATTERN [FILE]...
Try `grep --help' for more information.
[fixup] complete for libtool.
==> Running configure in work/main.d/libtool-1.5.14
checking for a BSD-compatible install... /usr/bin/install -c
checking whether build environment is sane... yes
checking for gawk... no
checking for mawk... no
checking for nawk... no
checking for awk... awk
checking whether make sets $(MAKE)... yes
checking for gcc... cc
checking for C compiler default output file name... configure: error: C compiler cannot create executables
See `config.log' for more details.
make: *** [configure-work/main.d/libtool-1.5.14/configure] Error 77

My gcc & ld versions:
Reading specs from /usr/libexec/gcc/darwin/ppc/3.3/specs
Thread model: posix
gcc version 3.3 20030304 (Apple Computer, Inc. build 1671)
[Johns-Computer:~] johnsmac% ld -v
Apple Computer, Inc. version cctools-525.1.obj~8

I really am over my head on this so if there is a tome I should be reading..
Also I don't understand why bash doesn't recognize some commands like setenv yet if I do csh at the shell it works-what is wrong there?