I also ran into this
problem. I encountered the problem after moving my clickonce app to
IIS6. In windows XP (IIS5) it seems to work out of the box. Anyway,
after hunting around I was able to get it working. I had to add MIME
types for the offending files. You can access the MIME types by going
into your site's properties -> HTTP headers -> MIME types ->
click NEW....then add an extension and MIME type.
I added these to get it working
extension: msp
MIME: application/microsoftpatch
extension: msu
MIME: application/microsoftupdate
After doing this my .Net 3.5 prerequisites installed fine.
Hope this helps someone...