If a .NET Version is currently installed, I'd recommend keeping it installed
& fully patched, yes.
Yes, uninstall in descending order; uninstall any Hotfix before uninstalling
the main component.
Yes, that sounds like a wise thing to do.
Follow any prompts to reboot if & when encountered.
Correct. Ideally, Automatic Updates will offer and install them without
problems now; alternately, you can download and manually install the
appropriate MS07-040 updates via the Download Center.
YW. Best of luck.
NB: You might consider getting official support for your problems, SF:
Start a free Windows Update support incident request:
Tip: If you encounter problems, temporarily disable real-time protection by
your anti-virus and/or anti-spyware applications (e.g., CounterSpy,
Spysweeper, Spybot, AVG Anti-Spyware) and/or any third-party firewall (e.g.,
ZA) before attempting to install any update(s).