Setting up php based web applications such as SMF etc. requires to set file and folder permission. In XP using NTFS file system, this is a problem when Anonymous website access is set. By default in-process applications such as ASP web pages use IUSR_MACHINE account and ISAPI applications (e.g. PHP) and other out-of-process applications use IWAM_MACHINE account for anonymous access.
I was trying to setup files and folder access required to install SMF using either of the two anonymous user account but failed.
So I just reset the SMF virtual directory access to use Windows Authentication and thereafter I found no problem installing SMF.