I can confirm this problem. Running setup from setup archive downloaded from ftp.mirror.ac.uk and selecting install everything caused freezing at xorg-x11-nest-6.8.1.0-1 (97%) with the msg "Cannot open log file C:\cygwin/var/log/setup.log for writing" after cancel. Note the first is \ and the rest is /. Tried several time, free up disk space with more than 1GB at the freezing point, same problem. The C:\cygwin/var/log/ dir was there but no setup.log. Created a setup.log for it before the freezing point didn't help. Dowloaded another gig of setup archive from a different mirror same problem except the freezing is now at xorg-x11-fscl-6.8.1.0-2 (97%).
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