@jaredbusch, 1803 fresh install doing the same thing, fresh iso downloaded via latest Media Creation Tool for the source location.
Tried numerous options including an installer program, a command line to install a specified package, and copying the sxs folder locally instead of mounted iso.
nadnerB's suggestion to run sfc didn't do anything, but runnings DISM /Online /Cleanup-Image /RestoreHealth appears to have done the trick. Net 3.5 finally installed successfully and didn't require a reset and repeat of 3 hours' setup.