It might not be obvious where the machine.config file is located for .NET 3.5 Framework, so here’s what Scott Gu said:
The configuration files for applications are versioned using the CLR version, and not the framework library versions. .NET 3.5 uses the same CLR version as .NET 2.0 – and so share the same root web.config file. That is why putting the configuration settings there would cause conflicts.
And here’s the locations for the machine.config for the different .NET Frameworks:
For .NET Framework v1.1:
C:\WINDOWS\Microsoft.NET\Framework\v1.1.4322\CONFIG
For .NET Framework 2.0:
C:\WINDOWS\Microsoft.NET\Framework\v2.0.50727\CONFIG
For .NET 3.0 and 3.5:
C:\WINDOWS\Microsoft.NET\Framework\v2.0.50727\CONFIG