This is failing when you create the USERs, not when you are creatign the LOGIN. The USER create is failing for exactly the reason that the error message states: you have not set the .Login property of the new USER objects:

Database db1 = srv.Databases["master"];

User db_user1 = new User(db1, db_login.Name);

db_user1.UserType = UserType.SqlLogin;

db_user1.Login = db_login;

db_user1.Create();