How do I set up an OpenArena server?

You can set up an OpenArena server with Multiplayer - Create as you described.

When hosting over the internet your friends need to connect to your global IP address. Determining your IP can vary by OS, but one way to confirm is to check here.

Looking at the wiki the general command to connect to a server is

connect address:port

Where "address" and "port" are specific to the server. Example:

connect 192.168.0.200:27970

If they are not connecting using commands, they can instead use Multiplayer - Specify Server and fill it out as below.

Note that an IP address that looks like 192.168.xxx.xxx is not a global IP address, but for your local network. Such an address will work during LAN where all computers are connected to the same router, but will not allow access to other players online.

The default port is 27960, and does not need to be supplied to the command if the server is using that port.

If your friend is still unable to connect using the correct address and port, the issue may lie with a router or firewall. First, get each player to confirm that they can connect to an arbitrary server. I suggest using this site to check for existing servers. More details on what you need to do to deal with ports can be found here.