As a quick check to determin if permissions or something else going on I made the following changes and still cannot get past this same point of contention:
I put IUSR id in the local administrator group, removed it from gener users and guest groups.
I used the mysql root ID and password for the DB connection.
I ran through the install.php again, everything passed green, but at step 8 it stops with a "failed to write config" error.
I opened the config.php file and can see where it updated with the db ID info, so I assume permissions are set, since it did update the file.
I think there is something else stopping the script from running, but I believe MYSQL is setup correctly, and I believe PHP is set up, since your script does run under it, and it does connect to the mysql db.
so, any thoughts, suggestions, comments? Has anyone gotten this to work with w2k3(sp2)/PHP5/MYSQL5/UBB7.2.2 ??
