I always set MiKTeX to "no" before a LyX install, but that's a personal preference. The cardinal objection I've heard to it as a default is that a new user might be confused when LyX "installed" but then couldn't open its help files or create new documents.
The LyX GUI doesn't open until the configuration script is done, so if you saw latex.exe spawning and dying repeatedly in the task manager, it sounds as if things were working correctly. You just need LOTS of patience. Regarding "ask" mode, any chance the dialog box was opening behind a window? I think you need to install both LyX and MiKTeX for "all users" in a shared machine/laboratory setup. Once installed, I think MiKTeX will let users individually install packages on a per user basis (but I'm not positive, as I've only used it on single-user systems). Last, installing all packages by default will cause huge frustration (and could bring the Internet to its knees). Paul
