.NET CF 3.5 is supported by CE .net 4.2 or higher. While I've encountered installation problems with .NET 2.0 on CE .net 4.1 devices
(you have to soft reset while the dialog "Setting registry entries" is displayed, or it will follow with an error message saying it wasn't installed correctly, and won't work; it will work if you soft reset before it displays the error message
), .NET CF 3.5 installs without any problem on any CE .net 4.2-based device, including Windows Mobile 2003 Pocket PCs.
