You encountered something I'm going to
keep pushing :-). I believe the installation routine should allow for choosing the database name, the database user name (and NT auth only), and manual setup of the IIS web (just copy the files where I choose and set the web.config).
It is not uncommon to have somebody else running the SQL shop from your workstation support staff. A SQL db will give you a database to use, with the proper naming, db file and log locations, and properly sized (the lansweeper DB should be created initially at 250MB for my environment). If a SQL shop (or using a hosting firm where you get a single database) is centralized for your company/university and multiple, independent installs are required for Lansweeper, then you are forced (using Lansweeper as is) to go with separate instances of SQL, greatly increasing complexity.
I use a pretty nifty CMS called DotNetNuke. It allows you to run multiple, independent installs inside a single database by allowing you to choose a prefix for its tables/views/SPs/etc. Not asking for that level of configuration, just the simple choice of the database name.
You can run Setup with service only, to get the files extracted, but it still doesn't extract the IIS web files. To get to those without risking my live web sites, I had to setup a temp IIS install.
Thankfully now though, I have found an easy way to extract all the files out of setup.exe without having to running any portion of the install routine.