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This looks to be happening on machines that are installing the add-in and the current machine configuration does not currently have Microsoft .net framework v3.5 installed and the user doesn't have administrator privileges. We've seen this on XP installations thus far.
From what I've read, it appears that you need Admin rights to install .net 3.5.
Links:
[1] http://www.ceptara.com/node/341
[2] http://www.ceptara.com/node/322
[3] http://www.ceptara.com/forum/2