Experiencing all the same problems as described here I solved the problem the ugly way:
Commenting out line 1256 in install_functions.php as suggested by another poster prevented my config-file being deleted. Still getting that weird character appended to my db-password, I hard coded my password into line 1145 in the same file. Like this:
$config_data .= "\$pixelpost_db_pass = \"mypassword\";
I never got a chance to try the updated install-functions.php which was posted here, as I did not have the patience to wait the two days from registering on the forum, to actually receiving my activation email :-)
Best regards - and thanks for an otherwise excellent piece of software
/Thomas