That sounds like Processing isn't capable of locating processing.core.
Your code is fine.

With the latest version of processing, the install folder is structured with processing.exe (or .app, whatever) in the main folder with the subfolder lib containing core.jar.

I suppose you should check to make sure that core.jar exists and is installed properly.
And also, what version of Processing do you have?

Yeah, that's the same folder structure that I have...
Now that I try it, import processing.core.*; crashes as well.
So it is a problem with PVector...
Can you declare a PVector without initializing it?
Do other classes (PImage, PGraphics, etc.) work?

Are you still getting the error "The constructor PVector(int,int) is undefined"? If so, you might have trouble with PVector.
But there are other errors with your code anyway that could potentially be causing that error or a different one...
Again, what is your sketch called? (If it is called PVector, that could introduce various problems.)

Look at the PVector Reference for that.
What you want there is location.add(velocity);
because PVectors are not Primitive Datatypes, you cannot simply add them.

calsign has put the finger on the original problem: if you call your sketch of the name of an existing class, like PVector, you will have trouble to use this class! There is a name clash because behind the scene, Processing creates a class of the name of your sketch.