What you have to do is reinstall/update the .NET packages and everything should work, it worked for me!
I have done everything that everyone has suggested and I still get the error message "Microsoft Zune has encountered a problem and needs to close". I really appreciate everyones help on this. I have done allot of hardware upgrades and it wouldn't hurt for me to format my hard drive. I have all my music and data on a different drive. How can I save my collection info, so I can reload it after I install Windows XP and the Zune software?