RESOLUTION:
When working with Temporary tables you need to define them by going to the menu Tools | User Defined Temp Tables. Here's an example:
1. Click 'Tools' | 'User-Defined Temp Table'
2. Click 'Creation' tab and input the
CREATE TABLE #tmpEmp (GID integer)
3. Click 'Execute'
After this is completed, you can then run SQL Optimize on the following query:
SELECT * FROM Grade G,#tmpEmp TE WHERE G.GID = TE.GID
