On RStudio version 0.98.501 I had a long .Rmd file which was easily converted to html once I clicked KnitHtml button. The Knitting process, as I understand, created several fold
I encountered a similar error like this: pandoc.exe: Could not find data file ProjectPart1_files/figure-html/sample_Mean_versus_Theoretical_Mean-1.png Error: pandoc document conversion failed with error 97
And one sentence from this page solved my problem.
"If you run into problems with cached output you can always clear the knitr cache by removing the folder named with a _cache suffix within your document’s directory."
When the error occurred, there exactly existed a folder with name like "ProjectPart1_cache" in the working directory. After I deleted it, the error was removed.