You can just remove most of the things in that part of the setup (that line is just for optimization and the other things are for saying that your using windows and do more optimizations)
@plead-for-destruction Is changing it to SDL.h fixes the problem (Change all of them in the source)?
if not, Is SDL.h in C:\MinGW\include\SDL\SDL.h or it is in C:\MinGW\SDL-1.2.14\include\SDL\SDL.h (or somewhere else)? If not the first case, then add wherever it is to the search directories (add C:\MinGW\SDL-1.2.14\include if the second case is true).
Have you got the SDL folder in your source? If so, try putting in "SDL/SDL.h" including the quote marks: " " If not, download it from the link in the Wiki (somewhere in there) and put it in your source directory, then do the process above.