Indeed, z: is for the emulator only.
In case of S60 1st/2nd edition you could use
CompleteWithAppPath completes the filename with the missing parts (drive letter and directories in this case).
_LIT (KMultiBitmapFilename,"IMAGES1.MBM" );
In case of S60 3rd/5th edition you can still use this function, but you have to provide the directories as well (since the executable resides in \sys\bin) and CompleteWithAppPath gets you the drive letter.