Windows SharePoint Services SP2 does support the .NET Framework 2.0, CLR 2.0 and ASP.NET 2.0; therefore you can build ASP.NET 2.0 Web Parts using Visual Studio 2005 and deploy them on Windows SharePoint Services SP2; however, this process is not as straight-forward as it sounds here!
To leverage ASP.NET 2.0 Web Parts in Windows SharePoint Services, a wrapper Web Part must be written to make the ASP.NET 2.0 Web Part appear to be a Windows SharePoint Services Web Part. After this is done, your ASP.NET 2.0 Web Part should function normally within your Windows SharePoint Services pages. Wrapper Web Parts will not be required in the next version of Windows SharePoint Services or the next version of SharePoint Portal Server (code named Office "12" SharePoint Servers), which both natively support ASP.NET 2.0. For wrapper Web Parts, you might want to investigate http://www.smartpart.info/default.aspx. You can grab the latest version of SmartPart (called Son of SmartPart) off of GotDotNet at http://www.gotdotnet.com/workspaces/releases/viewuploads..... This SmartPart should allow you to contain ASP.NET 2.0 Web Parts on WSS SP2 sites inside Web Part Zones J – I suggest you give it a shot!
However, SharePoint Portal Server 2003 SP2 DOES NOT support .NET Framework 2.0. However, the next major release of SPS will be fully based on ASP.NET 2.0 and will make use of its many features.
This article would shed more light on the new features in WSS SP2 and would also give more info on how to configure WSS SP2 to support .NET Framework 2.0.
My opinion around the matter is this:
Finally, I would suggest that for Enterprise-Level Portals you continue to use SharePoint Portal Server 2003 SP2 and build native Web Parts on .NET Framework 1.1 like you would normally do until the next major release is out.