There was an error in the client (should be fixed for next release) that meant that the packet informing the client of an error during character creation was not being handled correctly. (Client expected 0x7e instead of 0x6e)
In most cases, this means that the character name is already taken, and you should try a different name.
If you have already tried a number of different names, or if this does not solve the problem, please upload your tmw.log file here.
Hope this helps
---Freeyorp