Seems the installation of the .NET Framework 3.5 SP1 can cause multiple issues for users of TFS…
1. The Microsoft SharePoint Team Blog makes mention of an issue that can happen with WSS 2.0 when you install the .NET Framework 3.5 SP1. While I may be a bit late to the game here (they posted on this in August of 2008 <g>), I think it still merits mention because it can affect TFS 2005 and 2008 installs that use WSS 2.0 (note – this does not effect WSS 3.0 installs). I’ll let you read their BLOG for full details, but the gist of the issue is that installing .NET Framework 3.5 SP1 issue on Windows SharePoint Services v2.0 can result in errors on your web parts….
Web Part Error: A Web Part or Web Form Control on this Web Part Page cannot be displayed or imported because it is not registered on this site as safe.
If you recently updated your server and installed the .NET Framework 3.5 SP1 and are seeing this, visit this SharePoint team BLOG post for help.
2. If your single-tier TFS installation on Windows Server 2003 SP1 or later uses FQDN (we’ve seen it with DNS entries differing from the machine name as well), you may experience sudden access issues after installing the .NET Framework 3.5 SP1 on the server. Windows Server 2003 SP1 added a new security feature named loopback check functionality. By default, loopback check functionality is turned on in Windows Server 2003 SP1. The .NET Framework 3.5 SP1 now respects that setting (early .NET Framework versions either did not, or somehow went around it). This combination of Windows Server 2003 SP1, TFS, FQDN, and the the .NET Framework 3.5 SP1 can cause your single-tier TF server to suddenly not be able to talk to itself and you may see errors like this:
TF30063: You are not authorized to access https://TFServer.OurDomain.Com:8081/. (type TeamFoundationServerUnauthorizedException
If you start to see this after Windows Update, review this KB article for more details on the problem and potential solutions.