I don't know about "refusing to install"... perhaps a sternly worded warning instead?

As far as lines of context, I would suspect that 3-4 lines before and maybe 2 lines after...? Difficult trade-off.

For myself, I'd like to see the source/context immediately after the error. And I agree - for syntax errors, probably just showing context for the first one is enough (at least as a default... can that be overridden by the user?)

Anyway, my $0.02CDN