Nevermind. I initially thought my problem was gone but it is still there.
Also, to note, I was incorrect- .NET 3.5 SP1 comes with Win7, there was no .NET install that kicked off during the vSphere install, must have been wishing to see it.
Still having the issue even after removing .NET 4.0 and reinstalling vSphere (which would indicate that .NET 3.5 SP1 would be behind the scenes)
I would like to also comment that a friend of mine who has never installed .NET 4.0 on his Windows 7 machine is running vSphere without any issues on his machine. It appears that once you've installed .NET 4.0, you can't get rid of the error.
For now, my only workaround is launching the app in XP Mode.