hook_install_task fails silently if there is an error in a loop?

I don't think your loop runs?
Your condition ($i == 10) will never be met because it's not TRUE when the loop starts ($i = 0), so the increment ($i ++) will never happen and the body of the loop won't be executed I think?
If you change your condition to $i <= 10 or something similar that'll get the loop running.

See:
http://php.net/manual/en/control-structures.for.php

Does hook_task even exist anymore?

This issue might be obsolete.

Right, let's see if we can get it to fail in the hook_install_task() then. That should be easy enough.

Tested this by adding the following to minimal.install

function minimal_install_tasks() {

  for ($i = 0; $i <= 10; $i ++) {
    $file = '/tmp/people.txt';
    // Open the file to get existing content
    $current = file_get_contents($file);
    // Append a new person to the file
    $current .= "John Smith $i\n";
    // Write the contents back to the file
    file_put_contents($file, $current);
  }
}

It ran just fine.

Then I appended fake_function_of_doom(); to for loop. Ran it again and got a:

Error: Call to undefined function fake_function_of_doom() in
/home/tlj/docker/drupal8/httpdocs/core/profiles/minimal/minimal.install, line 32

It does look like the issue has been fixed at some point over the last couple of years.

frob, what do you think?

What I did to make the installation stall was just adding to the loop. Like this

function minimal_install_tasks() {

  for ($i = 0; $i <= 10; $i ++) {
    $file = '/tmp/people.txt';
    // Open the file to get existing content
    $current = file_get_contents($file);
    // Append a new person to the file
    $current .= "John Smith $i\n";
    // Write the contents back to the file
    file_put_contents($file, $current);
    fake_function_of_doom();
  }
}