Hey Nipper,
Just so you understand, .NET Framework is technology which uses side-by-side assemblies. Essentially, 1.1, 2.0, 3.0, and so forth all run completely seperately of each other.
The interop for HotFolders uses 1.1 which is why you need to have it installed. One additionaly side note, if you are using Windows 2003 Server, 1.1 is integrated directly into the OS. Thus, go to your add/remove programs to install or uninstall it.
Hope this helps.
Stacy