Ola Hallengren's Backup solution error message after moving files using cmdexec stops job, this disagrees with faq
After further digging (and almost emailing Ola) I found the source of my 
confusion.

After querying the CommandLog table (@LogToTable = 'Y') found that while the TSQL job steps were reporting the error, the job actually completed, logged the commands to the table as successful (and of course the files existed on disk.)

It looks like not only do TSQL job steps stop reporting on the first error, which is referenced in a different part of the FAQ.

If you are seeing that the SQL Server Agent History reports a failing job, verify that the same failure is reported in the master.dbo.CommandLog table, and ensure you have @LogToTable = 'Y' specified. 

Ola's job is behaving as described in the FAQ, and the reference to TSQL job steps was the hint I needed.