I have just made a successfull installation, albeit on a VMWare virtual machine. Nevertheless, this is what I did, step by step (ignoring the steps to create the virtual machine in itself):
1. Install Ubuntu 6.10 from an Ubuntu 6.10 Desktop DVD, with default options.
2. Immediately upon successful installation, ran Update Manager with the default user and waited for it to fully update everything.
4. Downloaded the following ISO into default user's home directory (link is taken directly from the wiki): http://torrents.thepiratebay.org/3646881/linuxmce-1.0-packages.iso.3646881.TPB.torrent
5. Mounted the aforementioned ISO on /media/cdrom, via the loop device:
$ sudo mount -o loop /home/user/linuxmce-1.0-packages.iso /media/cdrom
6. Downloaded and installed the official LinuxMCE installer:http://linuxmce.com/download.php
7. Clicked on the new "Install LinuxMCE" icon on the desktop.
8. Chose hybrid core.
9. Chose manual network configuration, leaving it on DHCP.
10. Chose NOT to run a DHCP server (even though this is solemnly ignored by the installer).
11. Waited something over an hour for the installation to finish successfully, closed the window.
13. Logged in with default user, ran Applications > Sound & Video > Start Media Center.
14. Waited a long time (another hour?), but no errors or deadlocks.
15. A/V Wizard popped up on a different X session, using 640x480@60Hz resolution. Left it on 640x480@60Hz (pressed OK), and subsequently chose UI1 (called "static" on that interface, or something to that effect). In other words, chose all defaults.
16. Accessed LinuxMCE Web Admin from another machine, created a new user, disabled DHCP server under Advanced > Network Settings. After a few minutes waiting, I decided the web server had hung, and therefore...
18. Logged in with default user, ran Applications > Sound & Video > Start Media Center.
19. Script regenerated the screens, taking a few minutes to complete (should it have done it again?)
20. Accessed LinuxMCE Web Admin from another machine. Verified that DHCP had been disabled (it had). Clicked on installation. Web server hung again. Repeated steps 17. 18. 19.
21. Accessed LinuxMCE Web Admin from another machine. Ran the full setup wizard by clicking on the left-hand side menu in top-down order. Used mostly defaults, except for the sole MD (a PC with no TV, just regular VGA), changing it to 1024x768@85Hz.
22. Great success!