If you haven't played PlaneShift's version 0.2, you might be picking a character name that belongs to someone else. When we went from 0.2 to 0.3, people got to register their character names so someone else wouldn't be able to take them. If that's the case, pick another name and try to create a character again.
If you're the one that character name has belonged to though, you're probably just trying to create that character on another account. You're supposed to recreate the char on the account you did the name registration with.