The keyword is TRIED.
The first error message informs met hat I must have .NET 3.5 installed. Funny, it is installed. Then I get a fatal crash. Ohwell, atleast the MSI is using the ubber-cool Red motif!
Either way I did some poking around and I found this launch condition to be the culprit:
(DP_NETFX35_INSTALLED_VERSION >= "3.5.20904.00") and (DP_NETFX35_INSTALLED_VERSION <= "3.5.21203.00")
I seem to have .NET 3.5 SP1 ( BETA ) 3.5.30428.01. Funny, EF BETA 3 package seems to be hardwired to not run against a beta version of the framework when it's a beta package itself. The part that really threw me off is the way the externalUI is used it looked like the LaunchCondition was information and something else blew up later.