I see a lot of posts about writing to the SD card, but I believe my problem is different. I am unable to create the SD card during the process of building an AVD.
So I found the problem. I was using a 64-bit Linux install, which did not have the ia32-libs package installed by default. The mksdcard utility will not run without this package. After installing it, I was able to build the AVD without a problem using the AVD manager.