Have you logged in with admin privileges on this box?

If the machine is not a domain controller then you must be able to do the following changes:

3. Go to Administrative Tools / Local Security Policy :: Security Settings | Account Policies | Password Policy

4. Turn "Minimum password length" to zero and "Password must meet complexity requirements" to "Disable"

5. Go to SQL Installation window and press "Retry".

6. After installation successfully done, turn changed security settings from steps 1-4 back.

7. Have fun.

MJ