I got the same error as you:

"The website declined to show this webpage"
"http 403 forbidden"

I fixed it in the following way:

1. Right-click on "My Computer" and select "Manage"
2. Click on "Services and Applications", "Internet Information Services", "Websites", "Default Website"
3. Right-click "dotnetnuke" and select "Properties" to open the properties window.
4. Click on the "ASP .NET" tab, and make sure version 2.0.xxxxx is selected, not 1.1.xxxxx
If only 1.1 is available in the list, install .NET 2.0 onto your machine and try again.
5. Then try going instead to:
http://localhost/dotnetnuke/Default.aspx
(not http://localhost/dotnetnuke)

If it works, it will redirect you to:
http://localhost/dotnetnuke/Install/I...

Note I got this working without adding ASPNET user to the local administrators group, and without setting WRITE or Directory Browsing to the dotnetnuke virtual directory object