WordPress's installation fails when the PHP-option magic_quotes_runtime is enabled.
When a user enters his or her database settings, the entire wp-config-sample.php is read. This file is then searched for certain strings, which will then be replaced with the strings the user supplied. However, wp-config-sample.php contains quotes, which are automatically quoted because magic_quotes_runtime is enabled.
To add more confusion: the installation doesn't even complain! Before these replacements are made, the databaseconnection is tested using the user-supplied strings. These of course are correct, but strings in wp-config.php are not!
* wp-admin/setup-config.php should check for magic_quotes_runtim
* wp-admin/setup-config.php should use the variables from wp-config.php to test the connection (after they have been replaced)
* wp-admin/setup-config.php should use a better way to create this config, this is really ugly!