The install script creates the files, it then cans out Apache, before informing me that "You cannot proceed unless all XenForo database tables are removed.". Manually removing the files and refreshing doesn't work????
Check the following things:
That your folders are writeable by the server
Try emptying the directory where you are installing xF and then re-copying the files again
Check your database user and make sure it has the correct permissions
Try a new empty database, it is rare but possible mysql did not clean up the db files properly.
Well I had similar problems with my local server. (using wamp server bundle... where you can switch apache, mysql and php versions on the fly) (http://www.wampserver.com/en/)
just like you it more or less crashed at step 2b and on page reload told me that db was already there and I had to remove tables to install.
I then just downloaded a different localhost server bundle xampp (http://www.apachefriends.org/en/xampp-windows.html)
you can install it without deinstalling the WAMP server (just make sure you dont run both at the same time.
I installed xenforo on Xampp and.. (it did give me a small errorr (i didnt touch it.. and it continued.. by itself) and suddenly it was installed. And it works fine.
Now when i'm working with xenforo, i launch xampp, for vbulletin and other stuff i run wamp..
only drawback with xampp is that you cant test an application with several versions of php just with 1 click.. but i can live with that. (and package also contains perl, mailserver and ftpserver which wamp doesnt)