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The global DOTNET_DIR macro gets initialized (to the highest installed .NET version) when VBP first runs, so my guess is that 3.5 was not installed on machine A but was installed on machine B when VBP was first used. Unfortunately, .NET has become bifurcated since v2.0. With v3.5, parts of it are in the 3.5 path, while other parts are still in the 2.0 path. And it will probably be even more mixed up with v4.0 :^)
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