Re: “Theme not found. Default theme applied.”
When I read your post the first time I missed that you put localhost and that is the problem. Anything before 0.8 you cannot install it on a localhost because there are some issues with it.
I would imagine you are running this on 0.8 though. The double slashes on the local server would be the issue. Maybe the address wrong on config.php or your setup? There are quite a few people with successful installs on localhost with 0.8.
It must be a setup issue, but really glad to hear that it works where it is really important, on the web.