I ran into this error message while trying to install the .NET Framework 4.0 Beta. I went into Programs to remove it and it wasn’t listed. Hmmm. So the first thing I did was download this tool:
http://www.raymond.cc/blog/archives/2008/11/06/how-to-check-what-version-of-microsoft-net-framework-is-installed-in-computer/
Run in and it will tell you which versions of the .NET Framework you had installed. Sure enough 1.0 was listed. So a quick google search brought me to this tool that removes versions of the .NET Framework.
http://cid-27e6a35d1a492af7.skydrive.live.com/self.aspx/Blog|_Tools/dotnetfx|_cleanup|_tool.zip
Just a quick note that this comes with no warranty. It worked for me but the cleanup tool is messing with the Registry so do so at your own risk.