ORA-01278: error creating file 'string'
Cause : An operating system error occurred while attempting to create a trace file specified in the command ALTER DATABASE BACKUP CONTROLFILE TO TRACE AS 'filename'.
Action - How to fix it : DBA Scripts :: www.high-oracle.com/scripts
Check the error stack for more detailed information.
Well, the reason for above error is that i have taken the above script from a 11g database and running it on 10g database. 11g has bring some changes in password management. Below code is executed on 11g and user created successfully, which is expected result.