The reason I pose this question is that I'm looking at WPF development and so using the latest version seems sensible. However, this means rolling out the .NET 4 runtime to PCs on old versions of the framework.
Windows XP is still the number one O/S (estimated 40%+ market share). To run .NET 4 on XP requires Service Pack 3, and although it is good practice to move to the latest service packs, often large companies are slow to keep up due to the extensive testing involved.
In fact, .NET 4 is not installed as standard with any Windows O/S as yet - Windows 7 and 2008 Server R2 have 3.5 installed.
This is not quite as big an issue as it was for .NET 3.5 as .NET 4 is significantly smaller as it doesn't include the older runtimes - .NET 3.5 SP1 included .NET 3 and .NET 2 and was 250MB, although this was reduced by doing a web install.
The size is also reduced a bit if you target the .NET 4 Client Profile, which should be OK for many WPF applications, and I think this may be rolled out as part of Windows service packs soon.
But still, if your application is only 4-5 MB and you need 40-50 MB of Framework it is worth consideration before jumping in and using the new shiny features.