Although the account is member of Local Administrators, the error "System could not verify 'domain\username' make sure the username and domain are correct" is seen when specifying the service account.
The service account setup window is also missing the password box, so the credentials cannot be verified:
The password box is not displayed when neither Scheduler Service nor Task Processors component is selected to install. As a result the credentials fail as no password is supplied.
In the installer select at least Scheduler Service or Task Processors if MMC Client Console is selected to install.
The service account setup will now show the password field and the correct credentials can be entered:
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