Just to clarify a few things about this. I would not recommend bypassing anything on the installer script, if it errors out that means the solution will not install or run correctly. The point of the installer is to help track down your issue so you can fix it, so bypassing it won't really fix anything. As you noted, when you faked the PHP setting, it errored out on SimpleXML. That is because SimpleXML is only available in PHP 5. And that is why it said PHP 5 was needed in the first place.
In your case, it was actually erroring out since you have PHP 4 enabled, it wasn't an issue with your MySQL version. The fix for 1&1 is making the .htaccess file, but you shouldn't edit any of the other install files.
There is also no need to create the connections file or populate the database yourself, the installer also handles this for you.