This has got to be one of the most consistently asked for "features" of .NET from the start! Download .NET Framework 3.5 Service Pack 1
Run off a network share with local permissions – You have voted and we have listened! We have brought managed executables in line with native code executables in how they behave when run off a network share. Yea!
Vance has the full scoop.. If you want to send someone flowers for getting this done, it is Vance… he designed, coded, tested, cajoled, prodded, persisted and advocated strongly for the fix.
Download .NET Framework 3.5 Service Pack 1