Tried to create an AVD from the eclipse environment in the following steps:
I deleted and reinstalled Intel HAXM as I was using the Intel Atom image. After inputting all the settings the 'OK' button was still greyed out only after selecting 'Skin' field as 'No Skin' did it become active, so I guess you have to choose a skin, even if that means choosing 'No Skin'.
That worked for me.