I am trying to deploy a ClickOnce app. It had worked previously when the server was just sitting with .Net 2.0 installed (no SP). Recently the server had 3.5SP1 installed on
Have you changed the target platform for the application itself? More importantly, does your development machine have .NET 3.5 SP-1 installed on it?
This error occurs when you have mismatched references. So your deployment expects one version, but the machine it's being installed on has a different version. It also happens if you have circular references.