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This error can occur when trying to load a user created extension:
"Library $USEREXT/xxxx.dll does not have a LibInit function"
User-created DLLs don't apply to the dependency list in the Extension Make script. Only extensions (.avx files) and ESRI created DLLs (avdlog.dll, avgrid.dll, avnet.dll, and so forth) are to be used in the dependency list of the Make script.
If you want to use user-created DLLs, you need to use the DLLProc requests in your Avenue scripts. These Avenue scripts can be part of the extension you create.
See the ArcView help topic "Extension Dependencies" for more information.