Hi,
I heard from another customer with the same problem. On their system, the .NET Framework 2.0 had been advertised on their system as a per-user install, likely by an Active Directory group policy deployment on their network. They were able to solve this issue by uninstalling the advertised version of the .NET Framework from Add/Remove Programs and then re-running the dotnetfx.exe installer to install the .NET Framework 2.0.
If uninstalling from Add/Remove Programs doesn't help, or if you don't have an Add/Remove Programs entry for the .NET Framework 2.0, you may need to use the automated cleanup tool described at http://blogs.msdn.com/astebner/archive/2006/05/30/611355.aspx.
Hopefully this will help you as well....
Thanks! Aaron
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