Here is a short, brief list of reasons why you should be seriously thinking about .NET 2.0, if you haven't already done so.
a) DataBinding in .NET 2.0 is quite different from .NET 1.1. The code is backward compatible in the sense that VB6 code will still work in .NET 2.0 - well it kind of does, but is that really how you should be writing your apps?
b) DataSets and DataAccess in general are VASTLY improved in .NET 2.0. The one thing that still pissed me off about ADO.NET 2.0 was the inability or nto having the equivalent of "batched update" for SqlCommand - but still, it's quite a quantum leap over what you could do before (hey you coudln't do batched updates before anyway, so what are you cribbing about). Given that, and other improvements in DataSets in general, the reasons for using Business Objects over DataSets are far fewer than they used to be in .NET 1.1.
c) .NET 2.0 addresses those zillions of minor annoying oversights that .NET 1.1 still has. Inability to address a serial port, not having an IPCChannel in remoting, clearing corrupt connection pools etc. are some of those.
d) The VS2005 IDE is much better and far more productive than VS2003.
e) Lets not forget VSTS. Seriously, do you really like VSS? You've gotta be nuts (or a masochist).
f) Fantastic new language enhancements such as Generics, anonymous methods and something as simple as "yield" (C# only), allow you to improve your design in ways that cannot be done in .NET 1.1
g) SCORES AND SCORES of under the scenes improvement - Especially in Reflection, Garbage Collection, and various commonly used collections all over the framework.
h) Future CTPs and Betas of preview technologies will be based upon an available version of .NET 2.0, not 1.1.
i) ASP.NET 2.0 is vastly different than ASP.NET 1.1. True there is somewhat of a backward compatibility maintained, much like a car with 7 wheels - it kinda runs, but it's not really a car. ASP.NET especially is reengineered quite a bit.
j) A number of new controls available right out of the box in both ASP.NET and Windows Forms - including DataGrids.
k) System.Transactions - The whole new and much better way of ensuring reliable code.
l) Fantastic XML enhancements in .NET 2.0, especially in terms of performance. We're not talking 5-10% gain, we're talking 4 times better performance such as XSLT.
m) SQLCLR - something you couldn't do in .NET 1.1. It presents interesting possibilities and opens arenas to things you just couldn't do before.
n) Partial classes - allow you to create a much better code-gen scheme. You don't *have to* inherit now to provide extensibility.
o) Visualizers - Help you reuse presentation logic in a rather pleasant debugging experience
q) No need for IIS to develop ASP.NET - I cannot even begin to count the number of times ASP.NET 1.1 decided to not co-operate, especially when it came to debugging. It was a pain to say the least. .NET 2.0 simply takes IIS out of the picture for development purposes, and still gives you a way to put that back in - just in case you are a masochist.
r) Sharepoint 2007 is built at-op ASP.NET 2.0.
s) Out of the box support for stuff such as Skinning, Master pages, etc.
t) XHTML, not just HTML generated out of ASP.NET
u) Fantastic improvements in the System.Diagnostics namespace, helping you create much more reliable applications.
v) ClickOnce !!! The best part about ASP.NET 2.0 is that you don't have to do ASP.NET anymore.
x) Flexible use of assemblies by using reference aliasing, enhancements such as the InternalsVisibleTo attribute that you can specify on an assembly (thus creating Friend Assemblies)
y) Ability to target specific CPU architectures - something you couldn't do in .NET 1.1.
z) And finally, all the other kids are doin' it.