Installation requires .NET 4.0 - system already has .net 4.0

I created a service that I now want to install for testing, I created an installer from templates in Visual Studio 2010. When I run the installer, I am prompted to download and install .NET 4.0, but I already have it installed. I tried to just install the file I point to (client 4.0), but not only does it still fail, it calls VS2010 to throw an unknown error and cannot open.

I have now uninstalled everything (including VS2010 beta) and started over with VS2010 full version full, .NET Framework 4.0 and Windows 7, but still prompts to install .NET 4.0 when trying to run setup. Can anyone point me in the right direction?