That error basically means you do not have the .NET Framework installed (v2.0)
You can install it from the Trainz disc(s).
It is also possible to download it from Microsoft Update (if you are running XP or earlier: it will be under custom updates) or if you are running Vista/7, click Start, enter 'turn windows features on or off' then place a tick next to .NET Framework 3.5.1. If it still complains, you will need to install .NET Framework 2.0
Shane