this error is not caused by Sitefinity, but rather with problems related to .NET 2.0 and .NET 3.5 versions. You can find more information on this problem here:
Basically, Sitefinity you are running requires .NET 3.5 and for some reason your machine is set up to use .NET 2.0. I have seen that you have .NET 3.5 version installed, so perhaps you should try to make sure you are running against it and if that fails try to reinstall .NET 3.5.
I hope you'll find this information helpful. If your problems persist, please contact us again and we'll see what we can do about it.
All the best,
the Telerik team