The development snapshot of Drupal causes error on my server
Apache 1.3, is considered deprecated. The very first thing I would try, is upgrading to a 2.* version, preferably 2.2, and try installing again with the standard .htaccess file. Given the enormous amount of apache servers running Drupal, the standard file should work.
What is the output of "cat /proc/sys/fs/file-nr"? That's useful for tracking down the to many open files issue, which likely is a server wide issue, and not really Drupal related.
While all patches to the 7 branch of core should pass all tests, it could be that you have stumbled on a broken commit. Why do you install -dev? Install 7.10 instead.