Description of problem:
In /etc/my.cnf set sql-mode to NO_BACKSLASH_ESCAPES:

sql-mode=NO_BACKSLASH_ESCAPES

Once set run mysql_install_db. Some SQL fails, but the install continues.

# mysql_install_db 
Installing MySQL system tables...
OK
Filling help tables...
ERROR: 1064  You have an error in your SQL syntax; check the manual that corresponds to your MySQL server version for the right syntax to use near 'abc\'), UNHEX(HEX(\'abc\'));\n        -> \'abc\', 616263, \'abc\'\nmysql> SELECT' at line 1
120407  3:57:42 [ERROR] Aborting

120407  3:57:42 [Note] /usr/libexec/mysqld: Shutdown complete

...

Version-Release number of selected component (if applicable):
$ rpm -qa mysql\*
mysql-server-5.5.21-1.fc16.x86_64
mysql-embedded-5.5.21-1.fc16.x86_64
mysql-connector-odbc-5.1.8-3.fc16.x86_64
mysql-5.5.21-1.fc16.x86_64
mysql-libs-5.5.21-1.fc16.x86_64

How reproducible:
100%