Agree with david, here are more optical way to resolve this..
machine.config - search in your dotnet install directory..
http://msdn2.microsoft.com/en-us/library/aa719558.aspx
see process model should be user as system...
You can check if there is wrong configuration for Report server as well...
1. Can you open your reports server? http://servername/reports
2. create a new application pool and set the following virtual directories to run on that pool
/Reports/
/ReportServer/
3. Then change /Reports/ and /ReportServer/ to run on .net 2.0
Do this by going to IIS and expanding your CRM web site. You will have the reports virtual directories listed there and on their properties menu there will be a .net tab where you can choose what version to run.
4. verify you can now access your reports server.