Hi Ian,
Running a Samsung 24" widescreen here (albeit on fsx nowadays, but shouldn't make a difference). 2D panels are made for certain resolutions only (say 1280x1024, which is 4:3 format). If you display this on a (in my case) 1920x1080 resolution monitor (16:9 format) ofcours this will cause stretching in full-screen. Luckily lot's of clever people have over the past years created modified panel bitmaps (and panel.cfg's) for the most common panel/aircraft packages for them to be able to be correctly displayed in 2D cockpit. Avsim.com, Flightsim.com and also the panel/aircraft-developers and their respective forums (read: other users) are your friends in this!

Regarding your dotNet framework: let Windows update run and it will normally include the latest dotNet version updates for your system (check though!). By the way, if i am not mistaken, Win7 (any version) already comes with MS dotNet framework pre-installed. Considering that latest version is 3.5 something-and-a-bunch-of-updates which is already in Win7, dotNet version 2 is not required for you to be installed. It's all there already. Am running Vista 64 bit (ultimate) myself and have no problems whatsoever with dotNet, therefore doubt if your problem is specifically 64bit related, but rather that your errormessage is the M$-way of telling you you already have a higher version installed and therefore don't need to install this one.
When pointed at the correct location of FS during install (basically what Dominic also mentioned already) WoAI packages always worked fine on my FS9 system. Don't know, perhaps running the Flight1 utility may help again here? And also (just making sure here) make sure to select the correct FS-version in the WoAI installer because the folder structures in FS9 and FSX are rather diffent when it comes to installs within the FS-folder (should your FS9 folder now happen to have a sub-folder 'SimObjects' then this might very well have been the problem...)
On FS9 used to use WoAI to complement and/or update my Ultimate Traffic installed. (Payware) UT schedules were rarely renewed and therefore the (newer) WoAI packages were over-time and where applicable replacing the respective UT schedules in my system, however UT was kept to fill the gap for the airlines for which WoAI was not offering any packages. Bit of a puzzle at times but always worked nice for me for filling my virtual skies.
Presently on FSX am now using Ultimate Traffic 2 (FSX only!) because it's the only package which offers scheduled flights modelled after real world flightschedules (the other alternatives, well, don't), plus since UT2 is injecting their traffic through FSX own SimConnect the AI traffic can also be controlled route-wise, and so about 2/3rd of the UT2 AI traffic follows (albeit default FSX) jet airways! Really cool to watch and looks much more life-like!

Hope the above helps you out, at least a little bit.
Cheers,
Stef