If you ever get this error 'The item does not exist at the specified version' from TFS, then double-check that the item you're requesting does actually exist in the repository. I was having this problem (Broken link, was originally forums.microsoft.com/Forums/ShowPost.aspx?PostID=2810999&SiteID=1) with one of our projects, where I was asking TFS for the latest version of this item:

$/Online Services Solution Template/Main/Source

But after much investigation (including querying the TFS SQL database directly (Broken link, was originally forums.microsoft.com/MSDN/ShowPost.aspx?PostID=2367863&SiteID=1)) I discovered that the correct item name was in fact:

$/Online Services Solution Templates/Main/Source

So another way to read that error message would be as "I can't find an item with that name, are you sure you typed it correctly?"