For future reference, I found that - at least in my case - the failure of the .NET framework installation w/ the error "system cannot find the path specified" is caused by a system file corruption.  After picking apart the installation using ProcessMonitor from sysInternals, a junction/reparse point is created from the System.EnterpriseServices.dll in the c:\windows\Microsoft.net\framework\v2.0.50727 folder to c:\windows\assembly\gac_32\System.EnterpriseServices\2.0.0.0__b03f5f7f11d50a3a.  For whatever reason, the junction point is created, but cannot be accessed - which causes the error.  In order to fix this, I ended up running the system file checker w/ sfc /scannow.

 Hope this helps someone.

 Glen.