Windows – Unable to install .NET Framework 3.5 to the XP machine

I have an application that requires .NET 3.5, but I can't install it. The installer quits saying "it has encoutered a problem during setup.

If I look at some of the error logs in the tmp directory I see.

Error occurred while initializing fusion.

It seems that I have 2.0 SP1 installed. Any ideas how I can get it to work?

I went through the temp directory and found these references to the error. Any ideas?

[04/17/12,18:55:09] Microsoft .NET Framework 2.0a: [2] Error: Installation failed for component Microsoft .NET Framework 2.0a. MSI returned error code 1603
[04/17/12,18:55:27] WapUI: [2] DepCheck indicates Microsoft .NET Framework 2.0a is not installed.

04/19/12 19:08:48 DDSet_Status: Loading fusion.dll using LoadLibraryShim()
04/19/12 19:08:48 DDSet_Error: Error occurred while initializing fusion. Setup could not load fusion with LoadLibraryShim(). Error: 0x80131700

04/19/12 19:08:48 DDSet_Status: Loading fusion.dll using LoadLibraryShim()
04/19/12 19:08:48 DDSet_Error: Error occurred while initializing fusion. Setup could not load fusion with LoadLibraryShim(). Error: 0x80131700
MSI (s) (74!08) [19:08:48:062]: Product: Microsoft .NET Framework 2.0 Service Pack 1 — Error 25007.Error occurred while initializing fusion. Setup could not load fusion with LoadLibraryShim(). Error: 0x80131700
Error 25007.Error occurred while initializing fusion. Setup could not load fusion with LoadLibraryShim(). Error: 0x80131700