Hi there,
For ASP.NET 2 based projects, we need to setup the .net framework as 2.xxx rather than 1.xx. So, you probably need to open IIS and there you will be able to find an extra tab which is exclusively added to setup .net framework version for the particular web application. Here, you should set it to ver 2.xx and it should probably resolve your issues.
HTH,
Kanaiya
Kanaiya Parmar
MCP, MCAD, MCSD