An update to my original post - I forgot to add that when choosing the custom installation, after it installs the DNN providers, I chose not to install any of the modules except for the default HTML module. It seems that choosing Auto or Typical was installing a module that timed out when writing to my new DB. Even adding "; Connection Timeout=120" or more to my conneciton strings in web.config and choosing the legacy Auto install failed at the very end with a thread abort error.

My steps:

1. Choose Custom Installation
2. enter database information, runs as db_owner, entering an object qualifier doesn't matter
3. After the DNN providers finished executing, I chose none of the optional modules
4. after configuring the rest of the options and finishing the installation, I manually installed the modules I needed.
5. Problem - seems to be a timeout when installing a particular module or modules, haven't figured out which one(s) yet.

It all worked just fine after following these steps. Hope this helps.

I had similar problem and the mistake i was doing is that I've create a new database in sqlserver and imported data / structure which i downloaded from the dotnetnuke site.  To fix that I removed database from sqlserver and then create a new database (name database). this time it was empty and then run again dotnetnuke install by providing right credentials. 

I will not suggest to uninstalling and install process because it just waste time while you can easily fix problem by your own.

Happy Holidays

Husain.