Ok, I fixed it.
My initial installation failed because I had a user named FMServer and Filemaker Server tries to create a user named FMServer - who'd a thought?
Anyhow, I had done an uninstall in my attempts to resove the problem and read in a post that if you do this, you need to make sure you delete the Filemaker Server folder after uninstalling. I didn't.
So this morning, I uninstalled Filemaker Server, deleted the Filemaker Server folder in /Library/Application Support and then re-installed and everything just worked! Love it.
I'm also having the same problem with FMS 12.03, whereas before upgrading IWP never failed regardless of the # of concurrent users of to 90. I've set up a windows task to run every 5 minutes to start IWP this dramatically helps but doesn't remove the problem. Filemaker... please fix this, as it's a huge issue.
My server is hosting only 3 flat files, and only 3 fields for data entry.
I have 64GB ram on this server.
Please fix this problem.