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I'm able to connect remotely to MySQL database on my server. When I try to use the Security Manager to create users, I get these error nessages:

Access denied (Error#1044)

and

Access denied, you need the RELOAD privilege for this operation (Error#1227)

Does this mean that I must setup user accounts in the hosted database table in order to create users remotely?

Sincerely appreciate your comments.

In MySQL server security it does matter whether you connect to server remotely or locally. For each user account you can setup different access rights for different hosts.
In your case you need to connect locally and setup appropriate access rights for remote connection.
For more information on security refer to MySQL documentation.