The problem is that you installed Framework 1.1 but Visual Studio 2002 requires Framework 1.0. You can have both Framework 1.0 and 1.1 on the same machine if you want but Visual Studio 2002 only works with 1.0 and Visual Studio 2003 only works with Framework 1.1. So you thought you were doing something good by taking the newer version of the Framework but it each VS is designed for a specific version of the framework so it messed you up. Install Framework 1.0 from the Components disc and everything should work.

I noticed at the start of your post you said you were using VS 2003 but then at the bottom you said 2002, but you problem is consistant with VS 2002. Also VS 2003 wouldn't have Framework 1.0 on the components disc.