The problem is the version attribute of the assembly itself which is 1.0.5000.0 (even though the file version number stamped on the .dll and viewed in the Properties of the file is 1.1.4432). This can be seen by either looking at the file in C:\Windows\Assembly or by adding system.dll from a local system drive to a .wso application project.

What was found was that the error could only be generated if the file (system.dll) was sourced from a mapped or UNC drive. If the original source of the file is a local hard drive, the error is not received. Further, the error is only seen if the internal attribute version is less than 1.1.4432. The error could not be reproduced when testing against one of our Altiris assembly files with a version attribute of 6.0.2074.