#1 - Make sure'you've set your FSDS2 preferences to point to the FLight Simulator path, and that you're making the correct type of model for the FS version ...
File -> Preferences
File Folders and that your "Flight Simulator" path is set correctly. In my case, it's "C:\Program Files\Microsoft Games\Flight Simulator 9"
and that your Sim Version is set correctly: FS2002/FS2004
Next, with your project open, choose:
CreateFS Object File ... -> Aircraft file (mdl)
Your next dialog is "Flight Model Selection"
This is where you choose your "donor" plane, that is, the plane upon which you're basing your flight dynamics and other characteristics.
Notice the selections (on the bottom of Image 3) that I've made:
Make New Aircraft: YOU MUST click this - otherwise you'll overwrite your donor aircraft. In this case, I'm using the Beech Baron as my donor.
Process reference parts: If you've made reference parts, like gear.center, gear.left, etc. to tell FSDS where to make the necessary [contact.points] entries in the aircraft.cfg file
Copy Textures: If youve made and assigned textures to your model, FSDS2 will copy the textures to your flightsim aircraft's textures folder
Click enter and you get the "Dialog" where you enter your project's folder name and Aircraft Name.
Click "okay" and FSDS generates the flightsim model file, all the folders, sound and panel aliases (to the same sound and panel as your donor aircraft), copies the textures, and tells you it's done with a final message:
It's now your responsibility to make sure your model flies like you want it, other corrections/additions to the aircraft.cfg file, and so forth.
Good luck