Hi Bob.
As part of the install, two new databases will be created in SQL Express.
You must be using an account that has SysAdmin permissions or at least permisison to create new databases in SQL when running the install. The install also will need to assign permisisons to the Network Services account to be able to access the databases from the web services.
With SQL Express you will need to replace (local) with your machine name\SQLEXPRESS as this is the default instance name for SQL Express. You can do the test connection on the Database Enumeration tab to verify.
If you need additional assistance email me and I can help you out.