best way to report cpan errors?
FYI, failing tests are not a cpan error :)

The installation doesn't work because of failing tests. What do you do in such a situation?...
Depends on what you're comfortable with and what you want to accomplish. If you don't care that some tests failed, you can force install,

$ cpan
cpan>force install <module>

# or alternatively

$ cpan
cpan> look <module>
perl Makefile.PL
make
make test
make install
[download]

If you do care that some test failed, you should file a bug report with the author (even though cpan-testers have several automated reports sent in). If you really care, you'll debug the failing tests, and write/submit a patch along with your report :)
http://rt.cpan.org/NoAuth/Bugs.html?Dist=HTML-WikiConverter-Markdown