Please verify you have the right protocols enabled in SQL Server Configuration Manager (see the attached screenshot). I can also imagine your firewall is blocking a connection to SQL Server, you may want to review your firewall logs for conenctions from the installer.
If setting up a database at install time is tough, you can simply skip this step. You will have the option to create a database after installation, using Database Utility (see link in the Start Menu). (This will prevent Trace Trimmer from installing correctly, you will have to reinstall it later with the right config file.)
You can also try to use a different SQL Server name, such as 127.0.0.1, localhost or actual hostname - they may use a different protocol to connect and work better in your environment.
Hope this helps.