The installer currently states, "Following Wikipedia's example, many wikis keep their policy pages separate from their content pages, in a 'project namespace'. All page titles in this namespace start with a certain prefix, which you can specify here. Usually, this prefix is derived from the name of the wiki, but it cannot contain punctuation characters such as '#' or ':'."
The radio button also currently defaults to the "Same as the wiki name" option. I think it should default to "Project" because that reduces problems related to conflicts between interwiki prefixes and namespaces when content is ported from one wiki to another. This recently happened on a couple wikis of mine; I ported a template from SuicideWiki to ChildWiki, and the project namespace links became interwiki links because SuicideWiki: was the project namespace on SuicideWiki and an interwiki prefix on ChildWiki. Had SuicideWiki's project namespace been "Project:" the ported template either would have either been fine or the link would have turned into a redlink and made the error obvious.
Another issue is that if you want to export project namespace content from one wiki to another, you can't do it unless you get rid of the conflicting interwiki link first. E.g., if I want to import SuicideWiki:Policy to another wiki, first I have to change the interwiki table to get rid of any conflicting suicidewiki: interwiki prefix or the importer will refuse to do it. It will say, e.g., "Page 'suicidewiki:Sandbox' is not imported because its name is reserved for external linking (interwiki)."
There would be no problem if the project namespace were named Project:. Therefore, I think we should encourage people to do that.
URL: https://upload.wikimedia.org/wikipedia/mediawiki/b/b9/ProjectDefaultNamespace.png