Yeh, thats what I think needs to be done.
Clearly your current .NET framework is corrupt, its left some dirty files lying around, if you remove as much as you can, and then do an install from CD, it should install .NET itself, and you have a better chance of success.
Here is a tool which completely removes ALL traces of .NET framework:
http://astebner.sts.winisp.net/Tools...eanup_tool.zip
Use it as a last resort before wiping the PC.
Use the tool to get rid of .NET then install version 1.1 ONLY and try the install, if it requires 2.0 then fine, but do not install any BETA versions.
Good Luck, and report back with results and questions.