Sorry to hear the installer is giving you trouble. If your database server is not on a domain you need to put the database machine name in the Domain field and in the Username field enter the name of a local account that has permission to create and edit databases.
The installer does not support SQL authentication so there needs to be some windows account that has these permissions. The reason for this is that the account you enter here will also be used as the IIS app pool account for the TeamPulse web site and the account for the TeamPulse Integration Service windows service. Both of these are configured to use integrated security for database connections, hence the need for a windows account.
the Telerik team