When you plan to distribute programs based on the .NET Framework, you have to make sure the user has the framework installed. Microsoft allows you to redistribute their framework but only in one form, its original Dotnetfx.exe file (see their description).
This also means that you can't build the framework into your own .msi package. There is no merge module or similar available. You have to provide a separate bootstrap installer, Setup.exe that looks for the installed framework and starts your redistributed copy of Dotnetfx.exe (or, alternatively, downloads and installs it from the Net). When finished, it will call your own installation package.
However, you don't have to write such a bootstrap installer yourself. The next version of WiX, 3.5 will have its own bootstrapper called Burn but until it is released, you can either use one provided by Microsoft or another, free, open source one, the dotNetInstaller. Or, as an alternative, you can write your own in the AutoIt scripting language.
