It's extremely difficulty to read such a long formula and it may be that the url is simply not correct. For debugging purposes (and even for real) its best to break it up into cells so you can see the result. For instance, put each item in a cell, then build your url and show it in a cell, which is what you then use in a formula:
Excel 2007<TABLE style="BORDER-BOTTOM: #a6aab6 1px solid; BORDER-LEFT: #a6aab6 1px solid; BACKGROUND-COLOR: #ffffff; BORDER-COLLAPSE: collapse; BORDER-TOP: #a6aab6 1px solid; BORDER-RIGHT: #a6aab6 1px solid" rules=all cellPadding=2><COLGROUP><COL style="BACKGROUND-COLOR: #e0e0f0" width=25><COL></COLGROUP><THEAD><TR style="TEXT-ALIGN: center; BACKGROUND-COLOR: #e0e0f0; COLOR: #161120"><TH></TH><TH>A</TH></TR></THEAD><TBODY><TR><TD style="TEXT-ALIGN: center; COLOR: #161120">1</TD><TD>Directory1/</TD></TR><TR><TD style="TEXT-ALIGN: center; COLOR: #161120">2</TD><TD>Directory2/</TD></TR><TR><TD style="TEXT-ALIGN: center; COLOR: #161120">3</TD><TD>Directory3/</TD></TR><TR><TD style="TEXT-ALIGN: center; COLOR: #161120">4</TD><TD>File.xlsx</TD></TR><TR><TD style="TEXT-ALIGN: center; COLOR: #161120">5</TD><TD>http://Directory1/Directory2/Directory3/File.xlsx</TD></TR><TR><TD style="TEXT-ALIGN: center; COLOR: #161120">6</TD><TD>=URLExists(A5)</TD></TR></TBODY></TABLE>
Sheet1
For what its worth, I find it not necessary to make the replacements with
%20 for space in the file name with this function.