The symptom:
myPassword v3.2 now includes the ability to create a SQL database for tracking user activity with myPassword. It is possible to use an existing installation of SQL and simply create a new database; or, if you do not have SQL server installed, the setup includes a link to the SQL Server Express download page- a free version that allows you to set up a database instance.
Sometimes when running this install, it is possible to encounter the Unhandled Exception in .Net. Please note, this is an SQL error, not an rDirectory/myPassword error; however, we have found the solution and can resolve this problem.
The problem:
Installing SQL server 2008 Express returns Unhandled Exception in .Net Framework:

(Click to enlarge)
The simple solution:
Delete the contents of %userprofile%\local settings\application data\Microsoft_Corporation, and re-run the installation.