The error is an indication that the DotNetNuke installer is unable to connect to the database AND that the ASP.Net worker process account does not have sufficient permissions on the root folder and/or child folders of the website. Let's try correcting the second issue first then have your try again to start the install:

1. Open the Windows file explorer and navigate to the 'c:\inetpub' folder.
2. Right click on the dotnetnuke folder and click on "Properties"
3. Select the "Security" tab.
4. Click on "Edit" button (may not be necessary step in Windows XP)
5. Find and select the "ASPNET" user in the list of account names.
6. In the permissions grid check "Full Control"
7. Click OK.

Note: If the "ASPNET" user is not listed, you will need to click on the "Add" button and add that user to the list before continuing with step 5.

It's been a while since I changed permissions in Windows XP so the above steps may need some modification to grant the ASPNET user full control on the website root and all child folders.

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Bill, WESNet Designs
Team Lead - DotNetNuke Gallery Module Project (Not Actively Being Developed)
Extensions Forge Projects . . .
Current: UserExport, ContentDeJour, ePrayer, DNN NewsTicker, By Invitation
Coming Soon: FRBO-For Rent By Owner