I spent way too long installing DNN4, but I finally got it with the help of this article:
http://forums.asp.net/1153547/ShowPost.aspx

I am using SQL Server 2005.  and I am running DNN on Win2003 as a Website not a virtual directory.  Here is what I had to do:

1. Un pack the files to a directory on your server.
   
2. Set the permissions to allow NETWORK SERVICE the right permissions to the directory.
3. Set permission on WINDOWS/TEMP to allow NETWORK SERVICE to read and write etc.
4. Open SQL Server and create an empty database.  Also create a login for that database and make that login the owner.
   
5. Rename release.config to web.config and edit it to reflect the database and database credentials. There are only 2 edits to make to the file and both are near the top
6. Make a website in IIS pointing to the directory.  Allow executables. I also created an application pool based on default settings.
7. In IIS, go to the ASP.NET tab and choose the proper (version-2)  of ASP.NET.  VERY IMPORTANT... do NOT edit the configuration file using the ASP.NET tab.  Just set it and forget it!
8. I think that is it.  It finally worked, what a pain, but the software is really cool and I look forward to learning more.