Virtual PC doesn't seem to like huge shared folders

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I'm trying to install SQL Server 2008 and setup claimed that:

"Microsoft .NET Framework 3.5 installation has failed. SQL Server 2008 Setup requires .NET Framework to be installed."

which was strange as Microsoft .NET Framework 3.5 service pack 1 was in place. I repaired it, uninstalled it and reinstalled it in various combinations, all to no avail. Looking on the Internet I found a post which recommended replacing the contents of the x86\redist\DotNetFrameworks\dotNetFX35 with the extracted files from a downloaded copy.

It was then that I found Explorer showed the x86 directory to be empty. Now this view was of a Shared Folder on the host O/S as I'm using Virtual PC. Sure enough, all the files are there on the real hard disk, just not visible from the guest virtual machine. This seemed to be a timing issue - the number of files to display was taking too long so Explorer timed out - as other directories with few files showed fine. Further searching the Internet led me to change the network adapter setting - I was using the local machine's card instead of "Local" to make downloading files from the Internet much easier. As soon as I reversed this, setup seemed able to proceed ... until the next error.