I don't get that error message you are seeing.
But when I am viewing the Memories Collection I am getting an option to create a memory in two places - a button on the first Memory in the list, and a menu item in the File menu:

But both items are using generative artificial intelligence to create a memory based on all photos in the library, they need the curated selection of images and faces. We cannot use it starting from an album with selected photos. We have to describe the memory verbally. So the scan of the library for object recognition and scene recognition and face recognition has to be complete. Perhaps you have not yet named enough faces? The automatic creation of memories prefers memories based on people. I have seen a similar error message for the face recognition. Photos used to complain that it cannot complete the Faces album for some people. It seems to need more than one photo with a named face, where it could detect the face itself, to be able to recognize the person again in other photos. As I could not add more photos of these people, because I have met them only once in my life and had only one photo, I imported some duplicates of this photo to satisfy the face recognition.
So far I could not create any memory using the AI tools that I really wanted to create. This tool has similar limitations as the Image Playgrounds. They are nice for scenes with family events, but I am doing mostly landscape and wildlife photography. When I use the search term "Volcanic calderas" to create a memory of the calderas I have seen or "Waterfalls" to find my landscape photos sorted thematically, the AI will present mostly the photos where a family member walked into the shot.