Knowledge Base say this about the error:
SolidWorks Premium 2010
6/3/2010 7:19:07 AM
Question:Customer get error mesage: Failed to create temporary file. Please change Simulation work directory.
Answer:Check to see where the Results folder is set to in the Study Properties. Make sure the user has full control permissions to this location. If the user has the option to create the results in the same folder as where the SolidWorks file exists, then see if those SolidWorks files are open from a network location. If that is the case, then have them try pointing the results folder to a local machine location instead.
Not sure if you're still having this issue.
I was getting the same error message. I was trying to revisit a previous simulation. My problem was that I didn't have the Simulation file checked out of PDM. Once I checked out both the piece part AND the simulation file (.CWR) it worked just fine.