The application manifest doesn't contain the executable, it only describes the permissions and stuff it needs in xml. You don't press Build, you press Publish in order to get an installer. It is made to download and install all prerequisites, such as .NET 3.5.

If you want the exe, go to the bin/Release (not the Debug) folder in your project directory and copy it from there. Don't say you weren't warned if it doesn't work on another machine. It may miss .NET, you may need the .config files, you may need some .resx resource files, you may need all kinds of stuff which will NOT be included.