Was one of the patches you applied KB2509553 by any chance?
I have seen this patch cause issues with another application (admittedly in Windows Server R2 and not XP). Security Bulletin MS11-030 KB2509553 is a Critical patch for a vulnerability in DNS resolution that could allow remote code execution, but it stopped the other application working.
I would be interested to know if this is a similar issue - just uninstall the patch from the control panel and reboot to see if the problem goes away. If not, you can always reapply the patch
This appears to be a problem with your .NET installation. See my answer to this question for a solution.
The relevant bits:
The error message you encountered is a generic .NET error message. It appears that there is a problem with your .NET installation. You can try to repair your installation by issuing the following commands on the command-line:
"%windir%\Microsoft.NET\Framework\v3.0\Windows Communication Foundation\ServiceModelReg.exe" /r /x
%windir%\Microsoft.NET\Framework\v3.5\WFServicesReg.exe /c
From the top of my head: You need .NET 3.5 sp 1.
2.0 does not suffice.