MediaWiki: 1.17.0 (files), 1.16.5 (db)
PHP: 5.2.14 (cgi-fcgi)
Using a shared hosting provider.
Like the original poster, I ran into a similar 500 internal server error while using the web installer. At the point where it was to upgrade the database from 1.16.5 to 1.17.0, it immediately returned this server error (black text on white screen):
Error 500 - Internal Server Error
The server encountered an internal error or misconfiguration and was unable to complete your request.
Please contact the server administrator and inform them of the time the error occurred, and anything you might have done that may have caused the error.
More information about this error may be available in the server error log.
Apache Server at musicnotation.org Port 80
(Unfortunately I'm not savvy enough to know how to access the server error logs.)
After clicking the back button, the web installer indicated that installation was complete. Surfing through the wiki, everything seemed to be fine and working, Special:Version showed 1.17.0. The only problem I noticed was the links at the top left of the page. The usual "Page" and "Discussion" links had no text in them (but the links were still there if you hovered over the blank tabs). On category pages these links read "Category" and "Category" instead of "Category" and "Discussion." Finally on special pages the link text was "& l t ; vector-namespace-special & g t ;" (but without the spaces).
I found my way to this discussion, and so I tried restoring the database from backup and running the update.php file from the command line using SSH. (I had to learn how to use SSH, which was new to me, and enable SSH access with my hosting provider.) At first it wouldn't work because it was trying to use PHP4, until I found this advice on the Upgrading page that tells how to force it to use PHP5. (Maybe it was using php4 that caused the internal server error?) Then update.php ran successfully. However, the links at the top left of the page are still not fixed, and still appear as described above.
Any advice on how to fix them is welcome, thanks.