Unclear what the problem is/was. I don't recall exactly how it was in MW 1.20 or what's changed, but for 1.31+ I know that wgTmpDirectory does not need to be set for the installer to function.

If there's any code that the installer executes that uses a temporary directory, it will find a writable alternative on its own (wfTempDir is in charge of that, which we "promise" will always work, any indication that it doesn't should be its own bug and would affect non-installer context as well).