> OK, the error is occurring because the engine is finding (or
> calculating) an invalid path to your temporary directory (unless you
> really DO have such a directory on your server, of course!)
>
> So - check your TempDirectories entry in firebird.conf first.

That was it. TempDirectories is not set by default in Firebird.conf.
Setting it explicitly to existing directory resolves the problem.

Thank you for your comprehensive answer.