C:\Windows\Microsoft.NET\Framework\v2.0.50727\CONFIG\machine.config
There are some differences in the other .config files too, but they don't seem to have a bearing on the MMC issue.
Thanks again Ove! Your workaround saved me a lot of grief.
P.S. inspecting the machine.config file differences, it appears that the 3.5 SP1 upgrade adds a new <system.serviceModel> section to the bottom of the machine.config XML. Presumably this is the source of the issue, though I cannot guess why. Deleting
this section of XML also appears to resolve the problem.
For the record the section added to mine is as follows:
<system.serviceModel>
<extensions>
<behaviorExtensions>
<add name="persistenceProvider" type="System.ServiceModel.Configuration.PersistenceProviderElement, System.WorkflowServices, Version=3.5.0.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35"/>
<add name="workflowRuntime" type="System.ServiceModel.Configuration.WorkflowRuntimeElement, System.WorkflowServices, Version=3.5.0.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35"/>
<add name="enableWebScript" type="System.ServiceModel.Configuration.WebScriptEnablingElement, System.ServiceModel.Web, Version=3.5.0.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35"/>
<add name="webHttp" type="System.ServiceModel.Configuration.WebHttpElement, System.ServiceModel.Web, Version=3.5.0.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35"/>
</behaviorExtensions>
<bindingElementExtensions>
<add name="webMessageEncoding" type="System.ServiceModel.Configuration.WebMessageEncodingElement, System.ServiceModel.Web, Version=3.5.0.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35"/>
<add name="context" type="System.ServiceModel.Configuration.ContextBindingElementExtensionElement, System.WorkflowServices, Version=3.5.0.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35"/>
</bindingElementExtensions>
<bindingExtensions>
<add name="wsHttpContextBinding" type="System.ServiceModel.Configuration.WSHttpContextBindingCollectionElement, System.WorkflowServices, Version=3.5.0.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35"/>
<add name="netTcpContextBinding" type="System.ServiceModel.Configuration.NetTcpContextBindingCollectionElement, System.WorkflowServices, Version=3.5.0.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35"/>
<add name="webHttpBinding" type="System.ServiceModel.Configuration.WebHttpBindingCollectionElement, System.ServiceModel.Web, Version=3.5.0.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35"/>
<add name="basicHttpContextBinding" type="System.ServiceModel.Configuration.BasicHttpContextBindingCollectionElement, System.WorkflowServices, Version=3.5.0.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35"/>
</bindingExtensions>
</extensions>
<client>
<metadata>
<policyImporters>
<extension type="System.ServiceModel.Channels.ContextBindingElementImporter, system.workflowservices, Version=3.5.0.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35, processorArchitecture=MSIL"/>
</policyImporters>
<wsdlImporters>
<extension type="System.ServiceModel.Channels.ContextBindingElementImporter, system.workflowservices, Version=3.5.0.0, Culture=neutral, PublicKeyToken=31bf3856ad364e35, processorArchitecture=MSIL"/>
</wsdlImporters>
</metadata>
</client>
</system.serviceModel>
Removing above from C:\Windows\Microsoft.NET\Framework\v2.0.50727\CONFIG\machine.config fixed the issue.