Good thing I am doing this in a test environment. The failed installation on the additional front-end server broke the crm environment, assuming that sicne it fails on the rollback action it didn't roll back some database changes?
So now I have tried on a fresh 2012 server VM new installation, all patched up. Ran the installer and it got to the same place and died again with the same error. Looks like it's having trouble enabling / configuring the IIS role / website.
I'm going to try to manually install 3.5 framework and IIS role to see if that will let me get further in the installation.
So far, not getting a comfortable feeling from the installer...