I tried to create a table using the Wabit SQL Window on the demo database. It said I could not do this as it was in read only mode. Can this be changed?
I am guessing that you want to edit the demo database because you want to try querying information that is closer to what you are planning to use Wabit with. If you are trying to create some tables to play with Wabit it would be easier to create a new database to make some test tables in. To create a new file based database with HSQLDB you can use a JDBC URL like "jdbc:hsqldb:file:<filename>;shutdown=true" with the username sa and no password. Replace the <filename> in the URL with an actual path to where you would like HSQLDB to create a file to store your database information, for example /Users/thomas/tempdb and you will be able to create any tables you want.
To answer your question specifically the demo database that comes with Wabit is embedded in the executable Wabit file and is therefore not editable. If you want to start with data from the demo database the file is stored in the SQL Power Library src folder in the ca/sqlpower/demodata package.