My understanding is that it should enable me to develop models even when I am not connected to the SAS server on my network. But when I try to create a project it says "The server process did not start".
Is my understanding correct? Could you point me to some resource that can help me understand this better.
If you are not connected to a remote SAS server, then EM workstation would then need to connect to a 'local' SAS server on your workstation. This requires that you have Foundation SAS (Base SAS) and SAS/STAT installed on your workstation. I suggest you check for these in Windows Control Panel.
SAS Enterprise Miner Workstation is a standalone variety of SAS Enterprise Miner that is designed to work locally on the machine where it is installed via a basic installation. You are correct- you do not connect to any server(s) when you use this variety to create mining projects. They are all processed and stored locally.
Here is a SAS note that documents common error messages encountered during project creation. I think it does document the one you are seeing as well:
Problem Note 58799: Diagnosing and resolving SAS® Enterprise Miner(tm) project creation errors