I solved my own problem.  In an effort to keep someone from finding this question in 6 months and posting a "Did you solve your problem" question and me not remembering what I did, I'll take the few minutes to post the solution.

The answer to my question is, "Yes, the installation will try to create the host and admin accounts".  The hidden issue is that nothing is logged or indicated if the creation of the host and admin account fails.

I was trying to be slick with the new ASP.NET 2.0 Membership stuff and set requiresQuestionAndAnswer="true".  This was my demise.  After many re-installs trying all sorts of stuff, I finally downloaded the source and walked through the code to see what was failing.  The DNN code does not support requiring a question and answer.  Right there in the code on line 125 of AspNetMembershipProvider.vb, the call to AspNetSecurity.Membership.CreateUser passes "Nothing" and "Nothing" to the question and answer parameters.

The part I'd like to see changed is the fact that the creation of the superuser failed (because of my setting in the web.config) file, BUT, there was no indication in the log files or in the logic that follows.  The creation of the SuperUser account failing seems severe enough to me that the installation should abort or -- at a minimum -- report it to the user via the logging appearing in the browser.

I changed requiresQuestionAndAnswer to false and my installation completed happily....5 hours later.