Framework 3.5 included in my Setup

Question

Hi.. I am not very familiar with Setup.  Recently I have a windows application developed using C# in vs2008.  I did a setup for my application.  Check from the Pre-requisite, the Frameowork 3.5 is auto selected.  I have Crystal Report in my application too.  End up my setup size become around 60MB which I think it is too big to be download.
So I did the following:
1.  I remove CR 64 but leave x86 msi in my setup folder (read from some articles saying that x86 can still be used in 64bit PC, is that true?)
2.  Change my application to use Framework 2.0 instead of Framework 3.5, then remove Framework 3.5 from my setup. (someone told me that Framework 2.0 is come with Windows XP?)
Now the size reduce to 20MB.  Can someone advice what I did aove is correct?  SQL compact is also included in my setup...  why .net setup seems to be complicated and large in size, unlike VB6 where there is no framework needed?  Just include needed dll will do... :(
Thanks!