I was able to overcome this particular problem with a fresh install.
Steps:
1. Deleted the MS-SQL database.
2. Removed the virtual website from IIS.
3. Re-ran the installation wizard http://localhost/<website_name>
4. The database scripts ran starting with the earliest verson 4.x - 4.8 - Successfully.
The rest of the wizard configuraton settings ran smoothly.
I believe the original issue started with incorrect permission settings on NETWORK SERVICE account (Read / Write / Change / Modify). This was corrected once I assigned Full Control NTFS permissions on the virtual directory install folder from Explorer.
Technical Specifications: Win2003 Standard SP2, MS-SQL 2005 Enterprise (all latest patches), .IIS6, ASP.NET2.0, DNN4.8
Now I'll start installing all the modules.