Hello @Elakiya,
The error occurs because the SDK was generated using the ARMGCC option. This option is intended specifically for use with MCUXpresso IDE for VS Code.

If you plan to use MCUXpresso IDE, you must instead choose “Other” and then select MCUXpresso IDE, as shown in the image below:

Once you download the correct SDK, simply drag and drop the file into the “Installed SDKs” view inside MCUXpresso IDE to install it.
You can also download SDKs by following the steps mentioned in this post. Even though the example is for the RT1060, the process is exactly the same for the MCXN546.
For help with Config Tools, there is a User Guide available on this page, which may be helpful.
If you have any further questions, do not hesitate to let me know.
BR
Habib