If you experience problems creating MS SQL Databases as an Azure Pack tenant, with the very descriptive error message “Database creation failed” and details “internal server error” you may have run into the same problem I had today.
Azure Pack states that the user needs to have a 8 character complex password, but in truth it’s using the settings from the Local Security Policy on the MS SQL Server, which in my case was 12 characters long. So any attempt to create a database with username and a password shorter than 12 characters gave that error message.
Quick solution, set a new Local Security policy with length of at least 8 characters. Problem Solved!