This one is a big pain. See KB 910341 for instructions on manually re-creating these registry entries.
Some times .NET 1.1 updates will not work. Symptoms include: Failed .NET updates, unable to remove older .NET (1.1 & 2.0). Microsoft's fix is in KB 922377, this has been a known issue since 2006.
This requests that .NET 1.1 and .NET 2.0 be removed & re-installed. Sometimes that will not work, so go right to Method 2 and use the .NET Installation Cleanup Utility.