Hey markanthony,
just finished doing a test install for PostNuke-0.761 and here is what I did.
Test server is SME6.5rc1, with an ibay named "pn",
1) installed e-smith-phpmyadmin-2.6.0-12.noarch.rpm,
2) created a database "pndata",
3) created a user "pnuser" with password "pnsecret",
4) gave "pnuser" full privileges to "pndata",
5) reloaded MySQL (within phpmyadmin),
6) http://<server>/pn/install.php
7) followed the instructions,

removed the install dir and the install.php file
9) logged into my new PostNuke site.
I also got the error about the "no database made",
but it did create the appropriate tables for the installer to continue.
This may be caused from
the database already being there.
Did yours stall or choke at
this point?
Good luck
Joe