Perhaps not a bug, more of a question... any reason why the patcher is still .NET v1.1? Any Vista/Win7 clients "vanilla" installs don't include .NET v1.1, .NET 2.0 I think.
I didn't have .NET 1.1 installed on my test rig, and I had to open up a CLR debugger to find out the underlying error was "Could not find System.Windows.Forms". I used .NET Reflector to check the references, and versions all have 1.05xxxx (.NET V1.1 I believe?). Anything stopping a quick Visual Studio "target .NET 2.0 Framework" ? Might catch some others out too... or maybe it's just me