Can DotNet Framework 3 be installed over framework 2.0

Yes.

When you install the .NET Framework 3.0, the installer will check to
see whether you already have the .NET Framework 2.0 (released version)
installed. If not, the .NET Framework 3.0 installer will install
the .NET Framework 2.0 for you, and then install the new .NET
Framework 3.0 components.

If you do have the .NET Framework 2.0 installed, the .NET Framework
3.0 installer will only install the new components of the .NET
Framework 3.0.