Originally Posted by kaloonzu
Found a solution:
You have to go to the .NET Framework folder in \Windows and copy the machine.config files contents from the Framewok x64 folder into the machine.config in the standard Framework folder. This seems to be caused by the fact that installing .NET Framework on an 64 bit computer does not install the necessary files for the x86 version.
Thanks, not exactly the solution but helped me find a solution:
I was looking into this error for a friend where they were trying to install the Vodafone 3G software for mobile Internet and getting this error on trying to run the program. They were running 32 bit vista so for obvious reasons there was no 64 bit directory.
However, to solve the problem I navigated to the file directory %windir%\Microsoft.NET\Framework\v2.0.50727\CONFIG\. Took a backup copy of machine.config and then copied the machine.config.default file to a new file [machine.config (copy).default]. I then renamed this new file to machine.config in this directory.
I restarted windows and now the program works fine. As the error said the machine.config file was corrupt so I just replaced it with the default settings :).
Just an addition to kaloonzu's solution for 32 bit users.