This is likely due to not allocating any memory for the file system. When you flash the Pico, be sure that you have selected the following setting: Boards --> Flash Size: 2MB (Sketch: 1MB, FS: 1MB) so the Pico has memory allocated for the file system.
Yes! Check out Step 1, Option 2 in the software README.md for detailed instructions to modify the code and flash the Pico using ArduinoIDE.