That step states:
Checking all path/url information. Please make sure you have all files uploaded, or you will get false reporing. NOTE: The first 3 might fail if PHP is unable to open files via a URL. If that is the case you may continue to the next step.
So the error your getting isn't a major one. Does the flat.gif exist in your images directory? If not you may want to upload that file and try again. Also, perhaps your images directory doesn't have the correct permissions set. Check the permissions for that directory and maybe even reset them again to be sure. (chmod 666)
Can you go to next steps and finish installation?
