Ok one thing is you were checking x,and y coords, but you need to check the value at x,y,and z.
As well as set the value at x,y,and z.
Also your using an older version this cap wont work for you.
http://dl.dropbox.com/u/666516/brbarray.cap
Sorry Im using the latest unstable, but here's the code if you don't want to download.
btw the value's in the array are set to zero by default(if you didn't already know that).
+ System: Start of layout
-> Array: Clear array with 0
-+ System: Repeat 5 times
+ System: Repeat 5 times
--> Array: Set index (random(5)+1, random(5)+1, 1) to 1
--+ System: For "x" from 1 to 10
---+ System: For "y" from 1 to 10
----+ Array: Value at (LoopIndex("x"), LoopIndex("y"), 1) Equal to 1
------> System: Create object Sprite on layer 1 at (LoopIndex("x")*10-5, LoopIndex("y")*10-5)
----+ Array: Value at (LoopIndex("x"), LoopIndex("y"), 2) Equal to 0
------> System: Create object Sprite3 on layer 1 at (LoopIndex("x")*10-5, LoopIndex("y")*10-5)[/code:y28wftyl]