I was having a similar problem (mentioned in another thread I'm still looking for to respond), but it would fail (without notice) when selecting "desktop class" (step 3). We found that there was a problem with the included javaw.exe file, so used the following start line in the command line (from wherever setup.exe is located):
setup -jreLoc c:\PROGRA~1\java\jdk1.6.0_25
(Modify to reflect the location of an alternate JRE, like the one I used above.)
Hopefully this helps. If not, good luck!