A couple of clarification items...
So maybe in Sheet1 is a list of items and you want to insert and name a spreadsheet in that same workbook for each item.
What does this mean?
"It also needs a failsafe mechanism which will check that the correct file was made with the correct entries."
What would the logic be for knowing what a correct file is and what a correct entry is? Are you talking about illegal naming characters or something else.
Why did you mention the word "file", if you are working inside a single workbook already, and you are only inserting worksheets in that one workbook file. Are you actually trying to create workbooks or worksheets.