Alfine 11-speed - what is needed to install it? What are common problems when installing?
I've not set up the Alfine 11 specifically, but it's quite similar to it's less-geared cousin.  You might also consider the Alfine 8 - it's rather cheaper and is a well-regarded hub with only slightly less total gear range.

In either case, the main things you'll need will be the hub (the SG-700-L is for disc and rim brakes), a 26"/559 rim of your choice, and spokes to match. In addition you'll need the Alfine 11 small parts kit, which includes the anti-rotation washers and other bits needed for installation. It's kind of annoying, really. 

Alfine hubs also don't include a cog, so you'll need to to select one. You can continue using your current crankset, using only one chainring.  The Alfine is rated for a ratio of 2:1, so a 16t cog would work well with your 32t middle chainring and give you a good range of 26" to 107". (107" is ~50kph at 100rpm cadence).  If you want to consider other gearing options, check out the Sheldon Brown IGH gear calculator. One note for installation, the Alfine has a fairly narrow chainline, so you'll probably want to line up with the middle ring. You can remove the inner and outer chainrings; replacing the outer with a simple bash ring / chain guard can be a nice touch.

As noted in other answers, you'll probably need a chain tensioner since your bike has vertical dropouts. The Alfine Chain Tensioner or the Rohloff Chain Tensioner are both rather good, basically just being derailleurs with stiff springs and no cable adjustment. If you feel like getting hacky, you might be able to succeed with a magic gear, especially if you're willing to do a little filing. Running the chain through a tensioner adds a little bit more drag and a little bit more slop than being able to tension it directly, but otherwise should be fine.

Lastly, since you've got flat bars, you'll want the Alfine SL-S700 rapidfire shifter.  Since you don't have the integrated shifter-lever pods, it should be a simple swap.

Installation should be fairly straightforward, since it's mostly removing stuff: extra chainrings, current derailleurs and shifters, rear wheel.  You'll install the wheel using the "vertical" antirotation washers (8R/8L, green &amp; blue), install the shifter and chain tensioner, run the chain and then cables and housing.  There's a bit of adjustment but the techdocs do make more sense when you have the hub in front of you - you're basically adjusting cable tension to line up the pair of yellow lines that mark the middle gear.

On the retail side, I'd recommend looking at some of the big German resellers - I've dealt with Starbike and Hibike and somehow they seem to undercut Shimano pricing pretty reliably (something about buying directly from Shimano Europe without a distributor? I don't entirely understand it); I just ordered a dynamo hub and it was cheaper including euro-shipping than I could get domestically in the US even from the deep discount sites online.