There is a good post in the Visual Web Developer Team blog. There are basically three categories of changes:

1. New functionality added

2. Fixes for issues customers reported at MSDN Product Feedback (aka Microsoft Connect)

3. Crash reports we received when you click 'Submit to Microsoft'

4. Performance improvements.

New functionality 

Typically service packs do not include significant new functionality since primary purpose of the service pack is to fix bugs. Implementing new functionality can potentially destabilize code base since the more changes we make, the higher probabilty of regressions. However, sometimes amount of requests outweigh risks. This time around Web Application Projects are included as part of the service pack. There are significant changes in the refactoring code so refactoring in Web pages should now be significantly faster. There is much better support for Ajax/Atlas controls.

Major bugs fixes

 

Title MS Connect Link
Incorrect CSS stylesheet warnings http://connect.microsoft.com/VisualStudio/feedback/ViewFeedback.aspx?FeedbackID=109855
Tag elements are inserted in uppercase in a css stylesheet! http://connect.microsoft.com/VisualStudio/feedback/ViewFeedback.aspx?FeedbackID=118815
Cannot use Help http://connect.microsoft.com/VisualStudio/feedback/ViewFeedback.aspx?FeedbackID=118444
Cassini loads page intoSubfolder when launching from Web Site http://connect.microsoft.com/VisualStudio/feedback/ViewFeedback.aspx?FeedbackID=218621
Rebuild Web Site Doesn't Refresh All Files http://connect.microsoft.com/VisualStudio/feedback/ViewFeedback.aspx?FeedbackID=225952 
Pasting a large amount of text into a HTML file caused a crash... http://connect.microsoft.com/VisualStudio/feedback/ViewFeedback.aspx?FeedbackID=106592 
VS2005 crashes when selecting Tag contents on Design view http://connect.microsoft.com/VisualStudio/feedback/ViewFeedback.aspx?FeedbackID=109756 
typing in .htm solution items is very slow to respond http://connect.microsoft.com/VisualStudio/feedback/ViewFeedback.aspx?FeedbackID=219978 
Format the whole document change custom attributes syntax http://connect.microsoft.com/VisualStudio/feedback/ViewFeedback.aspx?FeedbackID=104740 
format document command corrupts casing of asp statements http://connect.microsoft.com/VisualStudio/feedback/ViewFeedback.aspx?FeedbackID=118314 
HTML indentation cannot be turned off http://connect.microsoft.com/VisualStudio/feedback/ViewFeedback.aspx?FeedbackID=119056 
asp' is an unrecognized tag prefix or device filter http://connect.microsoft.com/VisualStudio/feedback/ViewFeedback.aspx?FeedbackID=104946 
Designer re-formats HTML code when using Master Page http://connect.microsoft.com/VisualStudio/feedback/ViewFeedback.aspx?FeedbackID=110961 
Web site publish target location is not persisted http://connect.microsoft.com/VisualStudio/feedback/ViewFeedback.aspx?FeedbackID=102857 
Error when renaming asp.net control IDs in design view http://connect.microsoft.com/VisualStudio/feedback/ViewFeedback.aspx?FeedbackID=101997 
VS Memory Leak when a Wizard inside a View inside a MultiView http://connect.microsoft.com/VisualStudio/feedback/ViewFeedback.aspx?FeedbackID=103420 
 

Other customer reported bugs:

DTS:VSNET05 IDE crashing issue while creating/opening ASP .Net application project.
SRX060719605181: PDB/XML file in BIN still pending source control when reopen solution from source control
Large amount of files in \bin folder cause IDE performance to be slow
Performance: Add option to turn off prop grid tracking in source view
Performance not good in html editor in large files
Default scripting language in classic ASP pages is jscript
Need to HTMLEncode the category value before placed in the generated schema
IntelliSense not working in content pages for ASP.NET AJAX asp: tag prefix items
Need to HTMLEncode the category value before placed in the generated schema
Validation gets turned on automatically upon view switch with errors

Crashes reported by cusotmers (i.e. - "send error report"):

Crash Location # of Reports
DW Bucket 239321134: Crash caused by CSSPKG.DLL!CCSSCompletionSet::GetCount 14
DW Bucket 239182652: Crash caused by VSWEBDESIGN.DLL!CStyleSheet::LoadFromURL 140
DW Bucket 241786858: Crash caused by MSWEBPRJ.DLL!CVsAdviseListEnumerator<ILangFolderEvents>::GetNext 14
DW Bucket 242260654: Crash caused by MSWEBPRJ.DLL!CClientBuildManager::WaitForAppDomainResetEvent 13
DW Bucket 242424159: Crash caused by HTMLED.DLL!CTridentClientSite::IsSupported 27
DW Bucket 238744467: Crash caused by VSWEBDESIGN.DLL!CLSRenderer::BlastLineToScreen 20
DW Bucket 240078465: Crash caused by TRIDSN.DLL!CTextTracker::BeginTextHighlight 19
DW Bucket 239630140: Crash caused by VSWEBDESIGN.DLL!CBase::SubRelease 16
DW Bucket 242553048: Crash caused by VSWEBDESIGN.DLL!CTreePos::GetBranch 15
DW Bucket 335629143: Crash caused by VSWEBDESIGN.DLL!CStyleSheet::LoadFromURL 23

Bugs found during internal testing:

New Site, Ctrl-F5 intermittently raises App_Offline error
If project file is exclusively checked out, migration from VS2003 to 2005 does not yield consistent results or fail nicely
Performance: Cassini not loading assemblies as domain-neutral.
script stmt completion doesn't work against activex controls
Copy web crashes if you connect to a site that does not exist
Lots of validation errors when opening transient HTML documents for debugging
Opening the first XML file on remote web projects is really slow.
Unloading Web sites can cause P2P, MSBUILD and cassini settings to be lost
Launch file system (Cassini) web with vroot of "/" rather than web name, launch URL is http://localhost:12345/
Error VWD does not support creating web sites on a Sharepoint Extensions Enabled Web Server
Editing MDF files does not work correctly in Web Application Project after F5 or CTRL+F5

Performance.

There are significant changes in the refactoring code so refactoring in Web pages should now be significantly faster.

Properties window is not getting updated by default in Source view. This improves editor typing responsiveness on lower-end machines. ScottGu has a great blog entry on the sugject with nice screenshots. You can always enable the window update in Tools | Options | Text Editor | HTML | Miscellaneous.

Opening XML files from remote sites should be much faster.

Performance is improved and memory consumption reduced when switching from Source to Design view in some master and content pages.