When I download the .NET 3.5 SP1 exe and run it, it unpacks and I get a message saying that
"Use the Roles Manager to configure .NET 3.5 SP1"
When I go to the Role Manager, I do not see the .NET 3.5 SP1 listed. Here's a screenshot:
You can install this directly without choosing application server under roles by going directly to "Features". There you choose to specifically install the .NET Framework with or without the WCF Activation piece.