This Error will also occur if you have a Group Policy currently defined that requires a complex Password. To Resolve you will need to manually Download, Install, and Configure Microsoft SQL.
For a quick Installation Guide, please see the following page: SQLCoffee - How to Install SQL Server 2008 R2
Please note that you will need to configure SQL for Mixed Mode Authentication for our applications.
When you run through the Installation again, select Advanced to Skip the Installer from Installing SQL.