Ok...
So what if this isn't a server issue or a config issue. What if this is a client side issue?
Could you try it in a different browser? Sounds odd, I know, but we need to cover all bases.
Alternatively, I'm happy to take a look at your site if you're able to PM me an admin account I can log on with. If you upload the XML file I will see if I get the same problem when trying to install it. Meanwhile I'll think of... something... else to try...