i connected to a msdb database instead of one of my sqlserver just to try, but i was able to create it fine. only thing i have found is that i am unsure how to get the new database to show up in the dropdown list. Only way around it is to close toad and open it again. they really need a refresh db button/ability.
Only thing i needed to do to create it was enter the name. If you can, i would restart your msdb service. It sounds like sometthing else is using it, but i didnt not know excluisve access to model was needed to create a db, but it does make sense. I dont see a way to kill users. if you looked in the model database, it proably still has you in there. So i would first close toad, then reopen and try to create a new one. If that fails, restart the servcie. That should work.