How can I resolve the "Table 'dbo.Foo' already exists." error when the table does not exist?

Closing and restarting SSMS seems to be the only way to get rid of the error. After doing so, I can again successfully create the table.

Create the Table with any other name and then rename it works fine. Server refresh did not work for me. You can try to restart Management Studios though.

I was having the same problem. Right-click on your server connection and select 'Refresh'. I did this and was able to save the recreated table without restarting SSMS.