The recent release of Microsoft Security Bulletin MS12-025 (KB2656370) might fail on Windows XP/Windows 2003 systems. The patch may fail with an error message: “Microsoft .NET Framework 1.1 — Internal Error 2705. Directory”.
In fact, if you try to repair existing .Net Framework 1.1, you would receive the same error message: “Microsoft .NET Framework 1.1 — Internal Error 2705. Directory”
Resolution: Please follow my previous blog post: http://blogs.msdn.com/b/smondal/archive/2012/01/13/ms11-100-kb2656353-error-microsoft-net-framework-1-1-internal-error-2705-directory.aspx