I will fully admit I am coming from a place of relative ignorance here but my uninformed understanding is that sometime following WWII, the U.N. created the state of Israel

The UN did not create Israel. It proposed a partition of what was known as the British Mandate for Palestine, originally envisioned as a Jewish state someday to come, where Jews and Arabs would get a state apiece. When this proposal passed the UN General Assembly, which was nonbinding, a civil war was launched between Jews and Arab Palestinians. The civil war turned into an international war when, in May 1948, Israel declared independence and the Arab states around it invaded (they had previously only been contributing resources and personnel more covertly in the civil war). This war is what Israel rose out of, not a UN decision.

Furthermore, Israel was conceived of well before the 1947 partition proposal. Jews had been pushing for a state in the area since the 1880s, and the British proposed a Jewish state there (and partition) for the first time in 1937. It was not a new, or post-Holocaust idea.

My question is why. Was it just so western nations could have an ally in the region?

The reason behind supporting the creation of Israel was moral and strategic. Morally speaking, the Holocaust absolutely contributed. But there was also a moral imperative because of the feeling that permeated the world that self-determination should be given to all peoples, a theme that animated the creation of many new countries around then. Coupled with the belief by many that Jews simply deserved a homeland of their own and had none, the moral case was made. The strategic case was less clear, since it was unclear which side a Jewish state would take in the brewing Cold War over time, but both superpowers chose to support one, believing it might ally with them. The US was the first to de facto recognize Israel when it was created, for example, choosing to issue such a recognition 11 minutes after Israel's declaration of independence. The Soviets issued a more forceful de jure recognition a mere 3 days later, well before the US did. Israel eventually gravitated towards the west, but it's worth remembering that many of Israel's founders were very far-left, to the point of being socialist in many regards.

Why is it a traditional ally of the U.S. and other western nations?

This began with the shift of the Arab states to rely on the Soviets for arms. Israel was seen as a counterweight when the West could no longer rely on Arab allies, who the US had tried to entice as well. Israel's success since then made it a powerful strategic player in the region.

And what happened to the people who claimed that territory already?

Which? Are you referring to Palestinians? Arab states?

I am assuming the creation of Israel is only one part of the continual Middle East conflict, but didn't its sudden creation make a complicated situation infinitely more complex?

Depends who you ask. That's kind of a difficult counterfactual to figure out, though.

Why would claiming that your ancestors owned the land thousands of years ago hold any weight in geopolitics?

See above.