Funny thing is that 6.06 worked. Anyway, I started booting without splash so I could see what happens, and these seem relevant:
drivers /rtc/hctosys.c: unable to open rtc device (rtc0)
Last line is about mounting(?) ata2 drive after ata1which I don't have, since I only have one hd. Before doing so it says "PCI Interrupt -> irq209" and then it hangs. I've thought, that maybe it means Vista rc1 that is residing on this hd too, since it made it's own partition. Could IT stop installation? Linux just can't read it and thus can't proceed?

Image md5 was ok and I burned disc with data verification enabled at 24x which pretty much negates possibilty of bad disc.

Any ideas? Oh yeah, and this is desktop edition.

Well I put Vista on a spare machine here to check it out and when I went to install another distro on it the only way I could even start to partition was to wipe the partition table because whatever MS had done to it screwed it up. To check if this is happening boot with a live CD like Knoppix and use something like cfdisk to open the drive to partition it, if it tells you that the partition table is corrupted/not usable then MS has done it to you too.