Your current Contributor Settings prevent you from creating, editing and deleting workflows

Error Message:

Your current Contributor Settings prevent you from creating, editing and deleting workflows

Probable Cause: 

By Default the Contributor Settings will be enabled on your site. You will notice this in the SharePoint Designer task pane.

Resolution:

This is because your account is present in the Content Authors group, which may “Restrict the use of some features” as the task pane mentions. This behavior can be modified if you turn off the "Contributor Settings" in SPD.

1. Open the site in SharePoint Designer

2. Site Menu

3. Choose Contributor Settings.

4. Click on Disable Contributor settings

5. Refresh the page you should not see the message. 

Important Information:

If you are a site manager or administrator, you are probably working with various groups such as Web designers or content authors who are working on different aspects of a Web site. With so many groups working simultaneously, you are probably worried that somebody might inadvertently break a site — for example, by changing the design of the home page, modifying the style sheet, saving files in a wrong location, or breaking the site navigation or search functionality. If you are concerned, the good news is that you can avoid these scenarios by using Contributor Settings to turn on and configure Contributor mode in Microsoft Office SharePoint Designer 2007.

Reference site: http://office.microsoft.com/en-in/sharepoint-designer-help/introduction-to-contributor-settings-HA010117469.aspx