For CPanel, see the configuration in the user manual chapter 3.2.5 page 17
or see FAQ
/faq#sec-58
or as you have Symbolic Link allowed, you can also let CPanel provide you a specific folder for the sub-domain and in this case, you have to specify the deploy directory with this full path.
If you configure CPanel to share the same folder than the master website as explain in the first 2 point here above, it is adviced to configure CPanel first and to check this configuration with the "hello world" procedure
See also tutorial step 8 :
www.jms2win.com/tutorial
For the database, proceed as you do usually when you install a new joomla.
I don't know if your hosting provider request to create the database before or not.
If you share an existing database in which you want to add new table prefix, of course you don't have to create a new DB as it already exists.
For possible architecture, see User Manual chapter 3.2.1 page 12.
Concerning the error you mention, I suppose this is a restriction of your server but I never seen this message before.