I have no experience using file: as I work with the daemon. However, I ran a quick test on another machine, and this worked.

cd /home/rhose/tmp
svnadmin create demo
cd samples
svn import . file:///home/rhose/tmp/demo -m "Initial import"
[download]

I tried it as:

svn import . file:///~/tmp/demo -m "Initial import"

and I got the same error you are getting... looks like you need to specify the path to your home directory.

Update

Yeah, what tirwhan said. *Smiles* At least I had a reason to play with file: for a bit.