The accessibility command for pressing the button is synchronous, so it does not complete until the targeting application finishes the action, which in this case includes putting up the dialog and getting some sort of answer.
The error returned is kAXErrorCannotComplete
This is either because you clicked Cancel, or because the application took so long to respond, either way the system reported that pressing the button failed, and Keyboard Maestro is reporting that.
This is just an indication of where in the source code the assertion happened, not a reference to a file on your Mac.
It is changed for the next version.
An alternative to the Press Button would be a Click Mouse at Found Image action, which would be asyncronous - the click would be simulated and then Keyboard Maestro would continue on.