Ok, in case anyone else is wondering, here is how I got it to work...
1) In C:\WINDOWS\Microsoft.Net\Framework\v2.0.50727\CONFIG\Browsers directory, add a new directory Devices, and copy mobile.browser there.
2) I then removed all the .browser files from within \Browsers, leaving only the Default.browser file behind (aspnet_regbrowsers.exe wants at least one browsers file in the root)
3) Then run the command %SystemRoot\Microsoft.NET\Framework\v2.0.50727\aspnet_regbrowsers /i
This generates the ASP.BrowserCapsFactory.dll file in the \Browsers directory, and registers in the GAC as well. I opened this dll in .Net Reflector. and everything seems to be in order. Quick test using Request.Browser.IsMobileDevice before
and after running aspnet_regbrowsers seems to indicate that it worked fine as well. I think others have posted the same here, and I guess I don't get the need for the "Devices" directory either.