As soon as it try to create the Database I get the following error:

What did I do wrong where???

I know it's not on Compatibility Matrix:
http://www.bmc.com/support/bmcremedycomp/AR_System_6_3_Compatibility_Matrix_v27.xls

But I've installed ARS 6.3 patch 18 previously on SQL 2K5 the client, I'm just now busy creating a development environment. The only thing I've noticed is that on production they have loaded SQL 2005 SP1 and mine is without any SP's. I'm downloading SP2 as we speak and I hope this will resolve the issue.

It seems ARS tries to drop the user wheter it exists or not.

Solution:
Login via 'sa'
Create an ARAdmin User
Create an ARSystem Database (Tablespace)
Log out
Install ARS 6.3 (You will get an warning that the control table could not be found, ignore this as Remedy will recreate the user and the Database)

Seeing that SQL Server 2K5 is not supported on ARS 6.3, I Recommend you not to use Microsoft SQL Server 2005.

That being said, I have not experience any problems with SQL 2005 and ARS 6.3, even patched it without any problems.

Regards

If it's your first install on this database, it's like the overwrite mode.

The installation program try to delete aradmin user even if this user doesn't exist...

So, it's a normal way...