post commit hook failed exit code 128 with no output

Running svn version 1.5.4 (r33841) on W2K3 SP2 STD server. The server has .Net 
framework 3.5 installed. After installing .Net 3.5 SP1, post hook no longer 
works. Client get exit code 128 with no output error message. Also get report 
when a microsoft security patch installed the same problem occurs.

Original issue reported by fredwen