Works fine here. What was the full configure line used?

I tried it again with a clean source tree and all worked well  - I can't reproduce it. Sorry for the annoyance.

I have the same problem, when building an RPM of PHP, the case I have is that I will in the end install it below a /app/... structure only when building an RPM it will be placed below /tmp/...

When buildning the RPM I don't want write access to the /app/... I found a problem with the install-pear.php and PEAR_Installer(). When the PEAR_Installer is initializing 
it creates some directories based on php_dir variable, only we are once the init is done replace it with $reg_dir, which can be php_dir, or install_root and php_dir. The patch below will set the php_dir to $reg_dir while it initializes the put back the original value, fast and ugly workaround ;-)

I did it on php-4.3.0, checked the code in php-4.3.0RC4 didn't see anything that it should be solved.

--- php-4.3.0/pear/install-pear.php~	Fri Dec 13 03:14:22 2002
+++ php-4.3.0/pear/install-pear.php	Tue Jan  7 15:27:31 2003
@@ -61,7 +61,11 @@
 
 $reg = &new PEAR_Registry($reg_dir);
 $ui = &new PEAR_Frontend_CLI();
+
+$old_php_dir = $config->get('php_dir');
+$config->set('php_dir', $reg_dir);
 $installer = &new PEAR_Installer($ui);
+$config->set('php_dir', $old_php_dir);
 $installer->registry = &$reg;
 
 foreach ($install_files as $package => $instfile) {

Set the INSTALL_ROOT environment variable, and install-pear.php will take care of the rest.  No need for dirty hacks.