The instructions are here. In summary :
1. Download dotnetfx35 from here
2. Run dotnetfx35.exe /x
3. Copy files to C:\Program Files\Microsoft SDKs\Windows\v6.0A\Bootstrapper\Packages\DotNetFX35SP1
4. Edit the product.xml as per the instructions:
1. Open the [Program Files]\Microsoft SDKs\Windows\v6.0A\Bootstrapper\Packages\DotNetFx35SP1 folder or %ProgramFiles(x86)%\Microsoft SDKs\Windows\v6.0A\Bootstrapper\Packages\DotNetFx35SP1 on x64 operating systems
2. Edit the Product.xml file in Notepad.
3. Paste the following into the < PackageFiles > element:
4. Find the element for < PackageFile Name="dotNetFX30\XPSEPSC-x86-en-US.exe" and change the PublicKey value to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
5. Find the element for < PackageFile Name="dotNetFX30\XPSEPSC-amd64-en-US.exe" and change the PublicKey value to the same as in step 4 above
6. Save the product.xml file
This is where the gotcha is. In the original instructions, there is a space before each PackageFile keyword, making it malformed. VS 2008 will then not recognise the product correctly. Just make sure that space is not there and it will all work.