Thanks Jan for your response but I finally did figure out what was wrong and
maybe it can help others too.

It turned out that the installer was waiting for IIS Admin to terminate and
IIS Admin was in turn waiting for World Wide Web Services to terminate. Since
it wasn't going to die for some reason, .Net 2.0 Install was going to wait
forever. With the installer hanged, I tried to click on the Exit button but
it offers only to finish installing the current module then quit but since
the current module is hung, it would never exit. This forced me to manually
kill the installer through task manager. Unbeknowst to me this left a
"suspended install" on my system which doomed me for all future install
attempts. I only discovered this suspended install when I decided to
uninstall .Net 1.1. It detected the suspended install and offered to fix it
for me, which it apparently did.

I then tried to reinstall VB Express and it dutifully hung while trying to
install .Net 2.0, waiting for IIS Admin to die. I went to My
Computer->Manage->Services and Applications->Services->IIS Admin and tried to
stop it there. It notified me that it was going to stop two other services,
one of which was World Wide Web Services (I forget the other). Anyway, that
failed too. After some research I discovered the name of the WWWS process was
inetinfo.exe and when I manually killed it through Windows Task Manager, then
apparently IIS Admin terminated and, BOOM!, the installer started going again.

One key discovery which helped me diagnose the hang was the discovery of the
installer's log file. By doing Run->setup.exe /? on the VB Express install CD
I made, I found out there was one. More sleuthing found it in my users temp
file at "C:\Documents and Settings\Me\Local Settings\Temp" where Me is my
particular user name (substitue your own here). There I found a text file
that was growing while the VB Express installer was doing its thing. Mine was
named dd_netfx20MSI1621.txt while I suspect yours may be different. I parsed
the file to the end and found out what was last happening when the hang
occurred. This gave me the clues where to look and I hope it provides a
general debugging approach useful to others.

In the end I have no idea why World Wide Web Services wouldn't terminate but
I suspect I had a utulity in my tray which was using it and after ithe
installer hung the first tiime and I had the suspended install, I was going
to be stuck forever if there wasn't some way to unsuspend it. All of the
other diagnostic steps like creating a "clean system" were a waste of time.
Other than uninstalling .NET 1.1 I am not sure how others could do this.
Maybe MS could chime in here?