You will need 3.0, but you do not have to install it separately. Same for
2.0 SP1 and 3.0 SP1. When you install the 3.5 bits it will realize the lack
of lower versions (3.0) and the lack of the SPs (2.0 SP1 and 3.0 SP1) and
install them for you.

There are a few areas where you can break an app with 3.x, but all that I
know involve extra bits, like ASP.NET AJAX, and can be solved by updating
references in the web.config file.

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