Since it’s highly unrecommended to run Windows Updates inside your Virtuozzo environment, installing .NET Framework 3.5 SP1 can be easily done by manually downloading and installing the setup that is available here:
.NET Framework 3.5 SP1 contains all the previous .NET Framework runtimes (1.0, 1.1, 2.0, 3.0 and 3.5), so you do not need to install anything else except this.
Note that you might need to reboot your VPS after the install process is complete.
** UPDATE **
We’ve noticed that in some scenarios the installation process for .NET 3.5 Framework on a Windows 2003 SP2 x64 VPS might terminate with an error that it cannot continue and in the error log you will see the following:
XPSEPSC x64 Installer:  Error code 1603 for this component means “Fatal error during installation.
XPSEPSC x64 Installer:  Setup Failed on component XPSEPSC x64 Installer
WapUI:  DepCheck indicates XPSEPSC x64 Installer is not installed.
In this case please follow these steps:
* Restart the VPS
* Rename the C:\Windows\System32\Catroot2\ folder (*NOT* Catroot itself but catroot2)
* Start the Print Spooler service from the Services management console inside the VPS
* Run the .NET 3.5 SP1 installer now
* Reboot if necessary when the installation finished successfully