In my NRPE init script the following start routine exists:
echo "Starting the NRPE subsystem"
/usr/local/nagios/libexec/nrpe -c /usr/local/nagios/etc/nrpe.cfg --daemon
Note after the echo on first line everything else is a single line even if it appears as two when you look at this message.
Are you running nrpe with the -c option to specify the location of the nrpe.cfg file?