Hi!
As I was running into this same issue, I've been playing with each and everyone's comments. However, none of them seemed to work. The thread mentioned here didn't give a hand, as "my" database was allready set to the collation mentioned there. The configuration I'm working with is an external SQL Server 2005, Visual Studio 2005 and DNN 4.5.3 Source. I tried setting up the development environment, and ended up pulling hairs out of my head.
However, somehow, after the 8th or 9th (I lost count) cycle of removing database, deleting "website" folder, unpacking website folder and configuring web.config, it started to work! I was getting ready for another "Failure 400" accompanied by a non existing log file. But all of a sudden, the installation pulled itself through!
Now, I tried lots of things, the last 3 cycles, as mentioned above, I used the SA account of the SQL server, that is the account that ownes everything. Maybe that has something to do with it. Anyway, somehow sometimes something seems to go wrong. I'm not saying trying it 27 times is the answer. Just, in my case, perseverance won.
Since it can be quite daunting to find any relevant or helpfull information, I'm posting this. Maybe someone is in luck, just like me, even if it's just one person :-) Good luck if you're having this problem, as no one seems to know what causes this.
Best regards,
- Alex.