This is due to an unfortunate incompatibility between Windows and Unix-like systems. Jupyter creates a temporary notebook.tex document in the current directory and then calls XeTeX to compile this document.
XeTeX tries to parse the command line with roughly the following algorithm after being called:
XeTeX <arg1> <arg2> ...
Check if <arg1> is a .tex file,
a) if it is a file compile it
b) if it not a file assume this is the start of an actual document given on the command line
On Unix-like systems ./notebook.tex is parsed by XeTeX into current_directory/notebook.tex which exists and is then compiled. On Windows systems the command line because of the different directory separator is .\notebook.tex which XeTeX does not recognize as a file and therefore tries and fails to parse as a LaTeX document.
A temporary remedy (could break other things) is to change the build directory in pdf.py from nbconvert (line 66) from
writer = Instance("nbconvert.writers.FilesWriter", args=(), kw={'build_directory': '.'})
to
writer = Instance("nbconvert.writers.FilesWriter", args=(), kw={'build_directory': ''})