The wallet clearly has cycles, so why did the creation of the canister fail?

It takes 0.5T cycles to create a canister, and I believe the default canister create command tries to give the created canister 3T cycles. This would be 0.5 + 3 = 3.5T, which is more than the 1.65T in your wallet in the screenshot.

You can change the amount started with by using the --with-cycles option.

Maybe specifying giving that canister 0.5T to start with (1T total required) would help?

Yes, it works now,thanks