If not first succeed, try try and keep trying until you hit the magic button. All the previous posts give you the order of things. If you do them and you know you got it right, then start thinking out of the box a bit. My install finally worked when I went into the control panel \ add remove and told .Net Framework 2.0 to repair itself.
After it completed, then the system started giving me DNN install messages and before I was only getting browser errors such as not website found etc.
I upgraded my framework to 2 when I added SQL Server 2005. I'm sure this had something to do with it.
Anyways, go back to the fundamentals. Make sure you've completed the basic steps to install then start checking what is not working by testing the diff parts. For example, check to make sure no spelling errors in the login you setup in the database and the one you are sending in the connection script. You might also test that the browser opens any local webpage. Test the browser by creating a dummy page and surf to it under your default web http://localhost Either create using simple html markers or quickly grab one from the web to test it. Named it default.htm etc... Make sure the documents permission has the setting for that document in your IIS web host. You'll need default.aspx for the DNN install but at least you can start eliminating stuff and if you can load the page - that proves the browser part is working. Keep thinking of those main steps to install and what can go wrong. Also, check that the folder premissions are set throughout all the folders and files under your virtual website. For me in Windows Server 2003 that was using the Network Service. Applying this permission to the root folder as I read did not set those permissions deeper in. I had to manually push it down. Actually, one of my later DNN install errors was that the \config folder needed permissions which is when I push it to all the DNN folders using the advanced button under the security settings.
Anyways, If not at first, keep whacking on it till you get it.