Is it a good idea to create index on field with only a few different values?

If you have a table with a lot of records and one of the fields stores values like 'Y' and 'N' or something similar (i.e. not a lot of different values) it does not help performance to create index on such field. Even worse, if you do create index and it does get used it will slow down the queries. Such index has low selectivity (number of records one index node identifies is huge - perfect selectivity is when one index node identifies one record).

You might want to consider adding that field to some other (primary key for example) which is already indexed and often used in WHERE clause or JOINs. This is very effective with Firebird 1.x, while Firebird 2.x and higher are smarter and work around those duplicates.