I figured it out. It was because I was using a friend's horse that they said didnt need a BG to work, so I didnt load in a BG. Loading in a blank BG made the horse work ^^
I was getting the same error. The pngs need to be in the same folder as the .horse file. Not sure if they also need to have the same name as the .horse but I named them the same just to be safe and then it worked.