I had this problem, I am running Wamp 1.7.0 with WordPress 2.2, so if you’re not setting up a blog on your local machine but using a proper webhost instead the following fix may not be much use to you.
Anyway, I found that the wait after submitting step 1 was just over 30 seconds, so in the php.ini file I found a likely culprit, doubling the ‘max_execution_time’ setting from 30 to 60. Then I restarted Wamp, created a new database, and tried the WordPress install.php again.
That works for me, ie I get the full page with the admin and password details without altering core WordPress files or MySQL bugs.