Here's the script in a zip file:

DotNet2Install.zip

You will need to get Download DLL from http://www.istool.org/default.aspx/isx/isxdl, then change the path to isxdl.dll under the [Files] section.

[UPDATE: October 27, 2008]
Apparently the binary for the Download DLL is not being hosted separately anymore. It is now part of ISTool. Just download ISTool, install it, and look in the install directory for isxdl.dll. It is there with documentation on  how to use with programming languages. I already included all that is needed to work with this script.

Here's the script's code for those that don't want to bother downloading the zip file:

[Setup]
AppName=.NET 2.0 Test Install
AppVerName=Test
AppVersion=Test Script
AppPublisher=SystemWidgets
MinVersion=0,5.01.2600
DefaultDirName={pf}\SystemWidgets

[Files]
Source: ..\..\..\..\..\..\Dev\Tools\Download DLL\isxdl.dll; DestDir: {tmp}; Flags: deleteafterinstall

[Code]
var
    dotnetRedistPath: string;
    downloadNeeded: boolean;
    dotNetNeeded: boolean;
    memoDependenciesNeeded: string;
    Version: TWindowsVersion;

procedure isxdl_AddFile(URL, Filename: PChar);
external 'isxdl_AddFile@files:isxdl.dll stdcall';
function isxdl_DownloadFiles(hWnd: Integer): Integer;
external 'isxdl_DownloadFiles@files:isxdl.dll stdcall';
function isxdl_SetOption(Option, Value: PChar): Integer;
external 'isxdl_SetOption@files:isxdl.dll stdcall';

const
    dotnetRedistURL = 'http://download.microsoft.com/download/5/6/7/567758a3-759e-473e-bf8f-52154438565a/dotnetfx.exe';

//*********************************************************************************
// This is where all starts.
//*********************************************************************************
function InitializeSetup(): Boolean;

begin

    Result := true;
    dotNetNeeded := false;
    GetWindowsVersionEx(Version);

    //*********************************************************************************
    // Check for the existance of .NET 2.0
    //*********************************************************************************
    if (not RegKeyExists(HKLM, 'Software\Microsoft\.NETFramework\policy\v2.0')) then
        begin
            dotNetNeeded := true;

            if (not IsAdminLoggedOn()) then
                begin
                    MsgBox('This program needs the Microsoft .NET Framework 2.0 to be installed by an Administrator', mbInformation, MB_OK);
                    Result := false;
                end
            else
                begin
                    memoDependenciesNeeded := memoDependenciesNeeded + '      .NET Framework 2.0' #13;
                    dotnetRedistPath := ExpandConstant('{src}\dotnetfx.exe');
                    if not FileExists(dotnetRedistPath) then
                        begin
                            dotnetRedistPath := ExpandConstant('{tmp}\dotnetfx.exe');
                            if not FileExists(dotnetRedistPath) then
                                begin
                                    isxdl_AddFile(dotnetRedistURL, dotnetRedistPath);
                                    downloadNeeded := true;
                                end
                        end

                    SetIniString('install', 'dotnetRedist', dotnetRedistPath, ExpandConstant('{tmp}\dep.ini'));
                end
        end;

end;

function NextButtonClick(CurPage: Integer): Boolean;

var
  hWnd: Integer;
  ResultCode: Integer;
  ResultXP: boolean;
  Result2003: boolean;

begin

  Result := true;
  ResultXP := true;
  Result2003 := true;

  //*********************************************************************************
  // Only run this at the "Ready To Install" wizard page.
  //*********************************************************************************
  if CurPage = wpReady then
    begin

        hWnd := StrToInt(ExpandConstant('{wizardhwnd}'));

        // don't try to init isxdl if it's not needed because it will error on < ie 3

        //*********************************************************************************
        // Download the .NET 2.0 redistribution file.
        //*********************************************************************************
        if downloadNeeded and (dotNetNeeded = true) then
            begin
                isxdl_SetOption('label', 'Downloading Microsoft .NET Framework 2.0');
                isxdl_SetOption('description', 'This program needs to install the Microsoft .NET Framework 2.0. Please wait while Setup is downloading extra files to your computer.');
                if isxdl_DownloadFiles(hWnd) = 0 then Result := false;
            end;

        //*********************************************************************************
        // Run the install file for .NET Framework 2.0. This is usually dotnetfx.exe
        //*********************************************************************************
            if (dotNetNeeded = true) then
            begin

                if Exec(ExpandConstant(dotnetRedistPath), '', '', SW_SHOW, ewWaitUntilTerminated, ResultCode) then
                    begin

                        // handle success if necessary; ResultCode contains the exit code
                        if not (ResultCode = 0) then
                            begin

                                Result := false;

                            end
                    end
                    else
                        begin

                            // handle failure if necessary; ResultCode contains the error code
                            Result := false;

                        end
            end;

    end;

end;

//*********************************************************************************
// Updates the memo box shown right before the install actuall starts.
//*********************************************************************************
function UpdateReadyMemo(Space, NewLine, MemoUserInfoInfo, MemoDirInfo, MemoTypeInfo, MemoComponentsInfo, MemoGroupInfo, MemoTasksInfo: String): String;
var
  s: string;

begin

  if memoDependenciesNeeded <> '' then s := s + 'Dependencies that will be automatically downloaded And installed:' + NewLine + memoDependenciesNeeded + NewLine;
  s := s + MemoDirInfo + NewLine + NewLine;

  Result := s

end;