Judging from the error message, your Vista doesn't have proper .NET version installed. You must first install .NET Framework 2.0 SP1 and .NET Framework 3.5 before proceeding with .NET Framework 3.5 SP1 installation...

Yes, Vista has .NET 3.0 built in (which should contain .NET 2.0 too). But if I'm not mistaken .NET 3.5 needs 2.0 with Service Pack 1 and 3.5 installed before you can apply 3.5 SP1. How you're going to apply SP when there's no based application installed, right? Btw, the .NET 3.5 SP1 installer I know didn't have full redistributable, only online installer which contain the bootstrapper only.

But auto update didn't list .NET Framework(s) as important update, it's listed as an optional software updates, so still have to select it manually for the first time.

There's different types of updates, and updates IINM like .NET Framework and Silverlight are optional since it's not needed to make your computer more secure.