Assuming you installed using the .exe installation file onto Windows . . . and assuming D: drive is where FB is installed, and assuming the Firebird engine is actually running, the following should work:
SQL>CREATE DATABASE 'Localhost:D:test.fdb' page_size 8192 user 'SYSDBA' masterkey'; #
should work. Note the backslash after the D: denotes a subdirectory. If you wish to create test.fdb in a subdirectory you will need to create a subdirectory first. The above should create the *.fdb in the root directory. If you wish to create the file on a 'remote' computer you will need to preceed the location with the name of the computer onto which you wish to create the file, i.e. example CREATE DATABASE 'OTHERPLACE:c:\testdirectory\test.fdb' and so on.
Would suggest you download, print and study the excellent Quick Start Guide and Helen Borrie's Migration and Installation. Also, you might want to consider using something like WFSQL which you can find on Firebird's wedsite under administrative tools. Much easier to use than isql that comes with Firebird. Found a listing of error codes for Firebird 1.5 - don't have site handy, just do a web search for Firebird error codes or similar.
Keep trying - it does work (I know, had problems myself until the lightbulb went off). Firebird is a first rate piece of software and the amount of information is extensive.

Take care.
John