Error in creating dataset in AEP

Vipin, this is due to may be a dataset already exists with same name. Try creating dataset with different name. A guess just , mark ans correct if it helps.

It's hard to say what the cause is here.  There are a couple things that I find strange.

1) The error code is 500. This generally means that the issue is going unhandled.  Unhandled issues tend to not give very much guidance about the cause or what actions you can take to resolve.

2) The API endpoint that is producing the 500 error code (based on the message) is the "Discovery" endpoint.  It doesn't make sense to me that /discovery/me would be called in this context as (in my experience) it is part of the Analytics 2.0 API.  For the AA 2.0 API this endpoint is used when trying to determine who you are, what company you belong to, etc. 

What I would do next.  

1) Open your dev console on the browser and switch to the network tab.  

2) Reproduce the error and watch the network tab for the request/response with the 500 status code. 

3) Dig into the response body to see if there is more detailed information. (post the details of the request/ response back here). 

also, 

Check the list of datasets in this sandbox just to see if any already exist.  Avoid creating new ones with the same name as existing ones (just to rule out the dataset name conflict as the cause of error). 

Since you said that this issue does not happen in other sandboxes, you might want to check your permissions specific to this sandbox. Specifically, make sure that you have the "Manage Datasets" permission.