If you are planning to upgrade to 3.5 SP1, you should consider using the New .NET Framework Client Profile Setup Package.
.NET 3.5 SP1 introduces a new setup package option for developers building .NET client applications called the ".NET Framework Client Profile". This provides a new setup installer that enables a smaller, faster, and simpler installation experience for .NET client applications on machines that do not already have the .NET Framework installed.
The .NET Framework Client Profile setup contains just those assemblies and files in the .NET Framework that are typically used for client application scenarios. For example: it includes Windows Forms, WPF, and WCF. It does not include ASP.NET and those libraries and components used primarily for server scenarios. We expect this setup package to be about 26MB in size, and it can be downloaded and installed much quicker than the full .NET Framework setup package.
The assemblies and APIs in the .NET Framework Client setup package are 100% identical to those in the full .NET Framework setup package (they are literally the same binaries). This means that applications can target both the client profile and full profile of .NET 3.5 SP1 (no recompilation required). All .NET applications that work using the .NET Client Profile setup automatically work with the full .NET Framework.