This problem is not a result of anything that you’ve done. The feature is meant to be bit of a shortcut, but it depends on your database server and the database configuration file that FactorySQL uses.
The easiest thing to do is simply type in the name of the table you want to use. If the table does not exist, FactorySQL will create it for you (assuming the “automatically create table” box is selected).
If you want to fix the problem yourself, you can modify the definition file for SQL server and fix the incorrect syntax. Let me first say that this fix will be included in the 2.3.1 release later on today. At any rate, you can open up SQLServer.xml in the Program Files\Inductive Automation\FactorySQL\database directory, and change line 39 to:
<ListTables>SELECT name FROM sysobjects WHERE xtype='U' order by name asc</ListTables>
After restarting FactorySQL, it should now work correctly.
As I mentioned, this fix will be included in the update that will be available shortly.