Lifted from the full VS 2008 SP1 http://download.microsoft.com/download/A/2/8/A2807F78-C861-4B66-9B31-9205C3F22252/VS2008SP1Readme.htm#General%20Issues as I have seen quite a few people run into this. If the .NET Framework 3.5 SP1 bootstrapper package is selected in the Prerequisite dialog box for a Setup project or in ClickOnce publishing, and also the "Download prerequisites from the same location as my application" option is selected, the following build error is shown: The install location for prerequisites has not been set to 'component vendor's web site' and the file 'dotNetFx35setup.exe' in item 'Microsoft.Net.Framework.3.5.SP1' cannot be located on disk. To resolve this issue: Update the Package Data Open the [Program Files]\Microsoft SDKs\Windows\v6.0A\Bootstrapper\Packages\DotNetFx35SP1 folder or %ProgramFiles(x86)%\Microsoft SDKs\Windows\v6.0A\Bootstrapper\Packages\DotNetFx35SP1 on x64 operating systems Edit the Product.xml f