If you tried to install Service Pack 1 for Visual Studio .NET 2005 (aka KB926601), via Microsoft Update or manually, chances are high that the upgrade failed. The reason is that the deployment MSI package is almost 500M large. Before the actual installation process begins, Windows tries to verify the package. In order to do it it needs to load it into a continuous block of memory. Since even modern machines might not have that much memory available, the process fails and causes the upgrade to fail as well. An error, similar to "Error 1718. File was rejected by digital signature policy" will be produced.

To fix the problem you can either increase the available memory by installing some extra and stopping all your processes (not very reliable), or disable the digital signature checking. The latter can be done by setting the value of the registry key

More information can be found in the following Microsoft support paper: "Error message when you try to install a large Windows Installer package or a large Windows Installer patch package in Windows Server 2003 or in Windows XP: "Error 1718. File was rejected by digital signature policy" .