.NET 4.0 is the last officially supported .NET Framework on Windows XP. I would imagine most people would have 4.0 if they have at least 7 or Vista by now. I would target 4.0 Client Profile, IIRC, even if you need to include it as a prerequisite, .NET 4.0 Client Profile is something like 30MB as a software package.

Keep in mind, if you are distributing this to a business, you will need appropriate permissions to install the frameworks. If this is something that will get in the way, then re-target to the framework they current have deployed.

You can distribute it with your project, this means they can install it locally without requiring to download:

http://stackoverflow.com/questions/1...-setup-project
http://support.microsoft.com/kb/324733