The current working directory (CWD) is always searched first, before PATH, when attempting to open a file name. The CWD is not affected when specifying a file with an absolute path. For example, given the following file system layout,
/boot/ /bin/ ls.c32 libls.c32 /foo/ libls.c32
assuming that the current working directory is /boot/foo, and assuming that libls.c32 is a dependency of ls.c32, then executing /boot/bin/ls.c32 will cause /boot/foo/libls.c32 to be loaded, not /boot/bin/libls.c32, even if /boot/bin is specified in the PATH directive of a config file.
The reason that things work this way is that typically a user will install all library files in the Syslinux installation directory, as specified with the "--directory" installer option. This method allows the user to omit the PATH directive from their config file and still have things work correctly.