Migrating from ASP.NET 1.1 to 2.0 can be quite a disturbing experience, at least it has been for me. You must go through a major (mostly automated) conversion process to recompile your application for 2.0. Most every one of your source files will be modified during conversion, so there isn't really an option of "going back" or developing a code base against both 1.1 and 2.0 in parallel (although I still hope to attempt this parallel track, it will require tremendous attention to detail and custom automation).
I wish I had read this document from Microsoft before I did the migration for the first time so I wouldn't have been so shocked and horrified at what the conversion wizard did to my code:
Common ASP.NET 2.0 Conversion Issues and Solutions
I highly recommend you at least skim it before attempting the conversion to get a vague idea of what you are in for. Running the conversion wizard the first time for me caused major problems because of my unrealistic expectations about what I was in for. My first 3 options for restoring a backup copy of my 1.1 project and source failed for unfortunate reasons, but luckily I had a 4th backup option that I could restore from. Lesson learned: You can't have enough backups before running the conversion wizard (it's hard to fault Microsoft too much for my near miss, but there are a couple of things they could have done differently that would have saved me quite a bit of grief).
Microsoft has more on migrating from ASP.NET 1.1 to 2.0 here:
[via The Daily Grind]