Is there anything to be said againt installing SmallestDotNet 3.5 (http://www.hanselman.com/blog/SmallestDotNetOnTheSizeOfTheNETFramework.aspx) as a CustomAction after MSI installation to ensure that .NET 3.5 is installed?
I've found many more complicated ways which (partly) include .NET framework into the installer.
How would you install (if necessary) the .NET 3.5 framework after msi installation automatically?
You will need to use a bootstrapper to install .NET and your application as you can't have two MSI processes running at once.
Generally you would use a LaunchCondition in your MSI to prevent your application from being installed if .NET isn't found, this stops the situation where the user installs your app but cancels the .NET installation - meaning your app cannot be used.
Example using WiX and Visual Studio can be found in the WiX manual under How To: Install the .NET Framework Using a Bootstrapper
I've also heard fairly good things about the dotNetInstaller bootstrapper, although have never used it myself.