We first encountered this error while reinstalling mscrm on a server that had changed by being demoted from a single server domain controller with Microsoft Dynamics CRM, joined to a new domain and had the server name changed.
We first tried reregistering ASP.NET via the command line below with no success in fixing the issue.
C:WindowsMicrosoft.NETFrameworkv2.0.50727aspnet_regiis.exe -i –enable
We finally figured out that the installer checks for a specific filter in the IIS settings, which is replaced when .NET 4.0 has been installed on a Windows 2003 server.
In IIS Manager, right click Web Sites, and select Properties.
Under ISAPI Filters, Add a new filter you call ASP.NET_2.0.50727, pointing to C:WINDOWSMicrosoft.NETFrameworkv2.0.50727aspnet_filter.dll
Dynamics CRM should now install without issue.
Please post comments if you are having other issues of contact the Dynamics CRM Experts at PowerObjects.