I have the same problem! Exactly!
IIS7 / mysql 5.0.51a / php 5.2.5 / WordPress 2.3.3
I know MySQL and PHP are both working fine: phpMyAdmin is running *great* with the very same credentials in a subfolder off the root. And I can log in to MySQL at the command line with these credentials and create database, tables, etc. no problem.
However the WordPress install.php cannot seem to create any tables in the database and regurgitates a ton of failed SQL queries back on the page.
I am really stuck on this. Any ideas??
I think I’ll try an older version of WordPress in a sec.