i wonder if it has something to do with doing "advanced" install, using current VL 7.0 partitions.
I dont know how to get it in "text mode install".
i was able to figure something out and got it to work this way...
when it was stuck on "setting passwords" - i shrank the install window down by grabbing the corner of it, then started a "terminal" by right clicking on the background, edited the "grub.cfg" and changed the kernel config lines to the newer 7.1 kernel and then i also repointed the "config", "System.map" and "vmlinux" file in "/boot" to the right version. Rebooted and it worked -- but who knows what didnt get done in the install.