mrkannan3:Since 3.5 is build on top of 2.0.Can i assume if i convert project from 1.1 to 2.0 by using VS 2005 which can be open by VS 2008 (just change the target environment to 3.5)? (right now I dont have VS 2008 installed on my machine, so i cannot be sure).
Yes, when you open a VS2005 (.NET 2.0) project in VS 2008 it will ask you if you want to change the target framework to 3.5, you can say no and leave it at 2.0. The project (.csproj & .vbproj) files are not backwards compatible so you will not be able to open the project files using VS 2005 (I think). I don't have VS 2005 anymore so I would not know.
I would just get VS 2008 and migrate to that version then upgrade the framework when you have the chance.
FYI: VS2010 can target 2.0,3.0,3.5 and 4.0 frameworks.