I'm also having the problem, but if I run the installer from the command line (gksu /usr/share/mce-installer/mce-installer.sh) I get the password dialog (sometimes), but I don't see any error messages in the terminal window at all, it just goes straight to the next command prompt.
I'm not using KDE, but I am using the Ubuntu Feisty beta instead of 6.10 (Edgy). I was thinking that was my problem, but since others I having the same issue, and make no mention of using Feisty, I'm hoping that it's something else (something fixable!)
Also, I'm not seeing any log message at all for anything mce-related at /var/log/