The ^M in your error makes me wonder if you somehow added DOS type line endings (
There is a utility that will convert the line endings for you that is not installed in Raspbian by default. You can install it like this:
sudo aptitude update
sudo aptitude install dos2unix
You may notice there are other updates offered. If you want to keep your whole system up to date do
sudo aptitude safe-upgrade
To change the DOS line endings to linux line endings:
sudo su - root
cd /etc/init.d
mv ospi ospi.dos
dos2unix < ospi.dos > ospi
Make the script executable
chmod +x ospi
Try it
./ospy start
Hope this helps…