ok so here is my 2 pennies worth on this issue, I had exactly the same issue last night on a Ubuntu webserver sitting in my DMZ.
it installed on when I had it sitting in the LAN but as soon as it was in the DMZ it kept freezing. The fix to set a password worked on it ok.
I re-installed my server and all seemed to be running ok. any way to cut a long story short I think my problem was down to sendmail. my server did not have access to the internet, as soon as I opened it up to the internet (so I could install updates) the sendmail worked and the passwords were emailed when I created a blog site.
could ti be that the sendmail is causing the hang when it generates the random password i wonder?
