1. Please try editing your php.ini file and updating the following settings:
upload_max_filesize="3M"
post_max_size="3M"
After you make the changes and restart Apache, please go to the System -> System Information -> PHP Information section in the Joomla Admin area. Then, search for the values you updated "upload_max_filesize" and "post_max_size". There will be a few columns after each value. The first column is the "Local" value, which is what is currently being used. Please make sure that is at the 3M value you specified above to make sure the values took effect and then try the installation again.
2. Please verify that you have a temp directory set that is writeable. You can find it in System -> System Information > Configuration File for tmp_path and make sure it's writeable in Folder Permissions tab.
-Melissa