I've been ablle to complete a successful installation but was never able to get it to work from within VS 2005.  I saved the DNN files on the test web server and then created a IIS virtual directory to point to the directory with the DNN files. I adjusted the permissions on the directory as mentioned in the installation docs. Then I browsed to the install wizard in the new virtual directory and went through the install. 

Before the above would work I had to delete and re-create the database in sql server used by DNN.

If you have IIS v5.x installed, visual web developer2005 express and sql sever express which come in one pakage, then you should not have a problem just follow these directions from the welcome.html, no fussing just press play/F5

Quick Installation

In order to make your experience with DotNetNuke as productive as possible, we have optimized the number of installation steps required for web developers.

As long as you selected the default options for creating a web project in Visual Studio 2005 ( selected "File System" as the Location: for your website ) and want to use the default SQL Server 2005 Express database included with the application, you simpy need to press Ctrl-F5 (ie. hold the Ctrl key down while clicking on the F5 function key) in order to complete your installation. The application may take a few minutes to build and you may find it useful to monitor the build progress output ( select View / Output or CTRL-ALT-O within Visual Studio 2005 ). When your web browser loads the initial Installation screen, you must choose the Auto Installation option to successfully complete the process.

I tried installing DotNetNuke 4.6.2 within Microsoft Windows XP Home Eddition

and i had some small problems since some options are not available such as IIS configuratoin. I did find some website that can help out. however could not find wndows 2000 cd

http://www.webthang.co.uk/Tuts/tuts_server/iis_xph/pippo_xp.asp

http://adamv.com/dev/articles/iis-on-xp-home