If it isn't preventing you from doing anything else, go to Microsoft's website and download Service Pack 3, install it and after the restart, that message should have gone away.
I have formatted the hard drive, reinstalled Windows XP Pro version 2002 (debug). just installed dotnetfx 2.0 SP2, Windows SP3 but still says (debug), cannot update from IE6 to IE8, or run windows update or install dotnetfx 3.5.