I had to re-install XP recently, due to a hardware upgrade. I used MpegModifier (which requires NF 1.0) and it failed, as I hadn't installed NF1.0 - I downloaded and installed NF3 (click here) and it worked fine. This may not apply to all applications that require Net Framework, but there seems to be plenty of confusion over which version is required and there were lots of issues created by the latest MS update. Perhaps NF3 will perform all the functions of NF1.0, 1.1, 2.0 etc so you may be able to remove older versions.
I've been searching in vain for a thread I started some time ago on the same subject. Can't find it, but the gist of it was 'do I need 1.1 and 2 if I've got 3?' and the answer was "yes" they each perform a different function. I do not know if that is true if you've got Vista. Hope that helps
Q: What happens when I install the .NET Framework 3.0? How can I upgrade if I already have the .NET Framework 2.0 installed? A: When you install the .NET Framework 3.0, the installer will check to see whether you already have the .NET Framework 2.0 (released version) installed. If not, the .NET Framework 3.0 installer will install the .NET Framework 2.0 for you, and then install the new .NET Framework 3.0 components. If you do have the .NET Framework 2.0 installed, the .NET Framework 3.0 installer will only install the new components of the .NET Framework 3.0.