How do I get past, "The database can not be created on the C:\ drive unless it is saved to your "My Documents" or "Desktop" directory.*"?

When prompted to create a new database, be sure to create it in your "My Documents" or "Desktop" directory.

To change the location to the Desktop directory, there's a button you can press:

From there you can choose your "My Documents" folder also.

The Desktop location corresponds to the Desktop on your Mac.  The My Documents location refers to your home directory (/Users/yourname/) on your Mac.