Yikes!   I don't know your hosting situation, but in my short experience with DNN, I found simplier to be better.  That is quite a directory structure you have there.......since you are probably hosted locally you should first simplify if possible.  All that "flotsam" can hide problems. 

• You don't want the source in the website root.   I am assuming that you plan to compile....so I would put my source elsewhere....like c:\website\dnn_source.
• You then compile to your website root which is C:\Inetpub\wwwroot.
• The database will reside in the  App_data folder of the DNN application

Then it willbe easier to troubleshoot DNN install problems

Hi - When I first installed DNN, I followed the guide and had nothing but trouble.  Then I decided on an old computer axiom "K.I.S.S." (It means Keep It Simple Stupid).  I have a programming background and when we ran into something that should work and doesn't then we simplify.  I know that follow that install guide can be bothersome - by experience!  So you are not alone.......(believe it or not, I am running into an install problem with another CMS and just as you are now) What I suggest is that you simplify. ....as I am going to do there.

1. Put your DNN website in the root - don't create any sub folders - let DNN create the structure.
2. Use the install package and not the source.  I found the install package easier than the source.  Installing the source is needed only if you plan to modify core components.  You can still do customized skins, contaniners and modules using the install package.  
3. Make sure you set the necessary permissions on the website root only.   
4. Make sure you seta the necessary permissions for the database.
5. Email me or PM me with any questions you have. I will be glad to help