You do need .NET 2.0. If you want to use the PLC, you also need to install the Smarthome Device Manager
It sounds like you are running the setup file from within the compressed file.
When you download the .zip file, unzip EVERYTHING into a new directory. Run setup.exe from that new directory, not from within the .zip file. If you are having a problem unzipping the file, I am a big fan of 7zip
Once the utility is installed, you can delete the directory you created and everything within it.
If that doesn’t work for you, please post the error message you are getting and we can go from there.