Steps to get DNN installed on VM and run:

1. Downloaded DNN Install version from here http://dotnetnuke.codeplex.com/releases/view/81081. Did New Install, not “Install and Source Codes” for now.
2. Created database DNN on VM Local machine SqlExpress and gave it full access to “Network Service” and my Windows Account
3. Opened web.config from c:\Development\Dotnetnuke folder (where the dnn installation zip files were extracted to)
   and changed the connectionstring from:<add name=”SiteSqlServer” connectionString=”Server=(local);Database=DotNetNuke;uid=;pwd=;” providerName=”System.Data.SqlClient” />

   to:

   <add name=”SiteSqlServer” connectionString=”Data Source=LocalMachineName\SQLEXPRESS;Initial Catalog=DNN;Integrated Security=True”
   providerName=”System.Data.SqlClient” />

4. Then went to IIS7/Default websites and added a new virtual directory, DNN and pointed to physical folder at c:\Development\DotNetNuke; Right clicked on the DNN VD and converted it to Application.
5. Once converted to Application, I could set it to use the application pool that is specific to this app.
6. So, went back to Application Pools and created one, “DNN” and changed Framework version to 4.0 and leave the Managed Pipeline Mode to
   default, “Integrated” and under the Process Model set the Identity to use Network Service instead of the default “ApplicationPoolIdentity”. The
   reason was that I could assign full folder access permission to the “Network Service” user account, but “ApplicationPoolIdentity” is not a
   actual Windows account.
7. Set the Application pool to this newly created “DNN” ap.
8. Browsed the site from IIS and just followed the onscreen instruction to go through the installation process. The database tables and objects
   are all created during this process. No need to run any sql installation script from Sql server side.