So I'm still stumped. I created a new custom column with the following settings:
Lookup name: finished
Column heading: Finished Books
Column type: Yes/No
I've also marked the books to be included in the Finished Books collection using the dropdown menu on that column so there are now checkmarks for the finished books.
When it comes to placing values on the "Customize collections to create from Calibre", that's where I get stuck. I choose "Create" for the Finished Books column but I have no idea where to place the values and what kind of values to place (the lookup name? "1"? "True"?). I'm guessing this is why Calibre won't generate the collection.
Any advice? I've a lot of books stored so having a collection for books I've finished reading is important (any format is okay with me just as long as I can make that collection). It's also the only reason why I decided to jailbreak mine (thank you @eschwartz for that).