This blog post has some tips. If you produce a verbose log file during the .NET 3.5 update, it would help in debugging the situation. I have to state that for this issue, it would be best if you contact Microsoft Support through whatever support channels you typically use. Until then try the following scenarios
Try installing as a ‘local admin’ not a ‘domain admin’. There have been isolated issues where 3.5 will not install properly unless done with local administrator privileges.
1. Run the .net cleanup utility from http://astebner.sts.winisp.net/Tools/dotnetfx_cleanup_tool.zip
2. Make sure there are no .Net versions from add/remove programs
3. renamed the C:\Windows\Asssembly folder and restart
4. On restart, install the .Net Framework 3.5 from the linkhttp://download.microsoft.com/download/6/0/f/60fc5854-3cb8-4892-b6db-bd4f42510f28/dotnetfx35.exe