Ok guys the issue is a commented out section on the default connections string.  Here is what it orginally looks like.

connectionStrings>
    <!-- Connection String for SQL Server 2005 Express -->
    <add
      name="SiteSqlServer"
      connectionString="Data Source=.\SQLExpress;Integrated Security=True;User Instance=True;AttachDBFilename=|DataDirectory|Database.mdf;"
      providerName="System.Data.SqlClient" />
    <!-- Connection String for SQL Server 2000/2005
    <add
      name="SiteSqlServer"
      connectionString="Server=(local);Database=DotNetNuke;uid=;pwd=;"
      providerName="System.Data.SqlClient" />
   -->
  </connectionStrings>
  <appSettings>
    <!-- Connection String for SQL Server 2005 Express - kept for backwards compatability - legacy modules   -->
    <add key="SiteSqlServer" value="Data Source=.\SQLExpress;Integrated Security=True;User Instance=True;AttachDBFilename=|DataDirectory|Database.mdf;"/>
    <!-- Connection String for SQL Server 2000/2005 - kept for backwards compatability - legacy modules
    <add key="SiteSqlServer" value="Server=(local);Database=DotNetNuke;uid=;pwd=;"/>
    -->

Note that by default the SQL EXPRESS connection string is Good to go but the SQL2000/2005 is Commented out.

See the bolded sections.  If you want to use the SQL 2000/2005 then this is what your connections string needs to look like.

connectionStrings>
    <!-- Connection String for SQL Server 2005 Express    

<add
      name="SiteSqlServer"
      connectionString="Data Source=.\SQLExpress;Integrated Security=True;User Instance=True;AttachDBFilename=|DataDirectory|Database.mdf;"
      providerName="System.Data.SqlClient" />-->

    <!-- Connection String for SQL Server 2000/2005-->
    <add
      name="SiteSqlServer"
      connectionString="Server=(local);Database=DotNetNuke;uid=;pwd=;"
      providerName="System.Data.SqlClient" />
   
  </connectionStrings>
  <appSettings>
    <!-- Connection String for SQL Server 2005 Express - kept for backwards compatability - legacy modules  
    <add key="SiteSqlServer" value="Data Source=.\SQLExpress;Integrated Security=True;User Instance=True;AttachDBFilename=|DataDirectory|Database.mdf;"/> -->
    <!-- Connection String for SQL Server 2000/2005 - kept for backwards compatability - legacy modules-->
    <add key="SiteSqlServer" value="Server=(local);Database=DotNetNuke;uid=;pwd=;"/>

Once I did this then it installed in a snap!

I think they need to update the manuals!!!!

Thanks Neadom!!!
   

Sorry, but that didn't help.  I've set up a laptop running xp pro EXACTLY the same as a box running Windows Server 2003.  I've set up an instance of SQL server on both machines and given each the same SQL server db name, same user id, password, permissions, etc.  Laptop running XP pro works - server does not install.  I get the same errors indicated on this post.

I've seen several posts on this site indicating this same problem on Windows Server 2003.  Is there a conflict with that OS v. XP?

Michael