To be honest the quickets resolution will be to follow the manual uninstall document for act, the get the .net cleanup tool from here http://blogs.msdn.com/astebner/archive/2006/05/30/611355.aspx, clean off .net 1.1 ONLY!! using that and reinstall ACT!. May sound a bit drastic but it will certainly get you up and running again in an hour or so and will be faster than trying to diagnose and repair the problem.
It will still work - you will need to download .net 2 to run it though (see about halfway down the doc). Before you download .net 2 try running the uninstaller - it will prompt you if you need to download .net 2 - it will save you time downloading it if you already have it installed.
Your database should be fine - the uninstaller doesn't touch this is any way, it will only remove the program files and SQL instance. If you are really worried you can take a manual backup of your db. To do this click Start -> Run -> services.msc -> OK. In the winodw that follows look for MSSQL$ACT7 (It may not be exactly that but it will be very similar). Right click on it and choose stop. Copy your db files (.adf, .alf, database files folder) to a pen drive or something similar.