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Can you please be more specific on the issue you are having?
You titled the subject 'creating a new application' yet your description talks about configuring.
The issue has now been resolved. During the FDM install, the default home location was changed from d:\hyperion\FDM to d:\hyperion. When creating an FDM application it is looking for a specific .XML file. Based on the default home being changed, the application could not locate the file therefore giving an error.