Nah, .NET can run on OS's as old as Win98, though you can't expect the best performance in that scenario
Hmm... Geoschmo is learning .NET... Geoschmo is a PBW admin... Any interest in reviving the development of PBW2?
/me also notices that Geo is using the latest version of .NET... shiny
Did you know of the "Mono Project"? If you think .NET is just for Windows, think again... Mono aims (and largely succeeds) to bring .NET to platforms such as Linux and Mac!
/me wants to work on PBW2 now
edit: for Atrocities, yes, you need the .NET runtime. It's similar in concept and size to the Java runtime, and you can get the latest version here:
.NET Runtime
Windows XP does ship with an old version of the runtime (version 1.1, IIRC), but the latest version is 2.0 which adds many shiny new features for developers to play with