As you probably know, Visual Studio 2008 and Visual Web Developer Express 2008 include designer that is shared with Expression Web. See my earlier post on this. Both Expression Web and VS are using same base code, but each team adds unique functionality. We share bug fixes and core feature set. For example, VS 2008 improved server control positioning, added .NET 3.5 and support for CSS overflow property. All these improvements will be available in Expression Web 2, currently in Beta. Expression Web 2 will also include fixes that are not in VS 2008 RTM since they were made to the designer after VS has shipped. These changes will appear in the next VS 2008 Service Pack (I don't have public date, sorry).

Note that designer is not shared as a binary, so installing Visual Studio 2008 will not update Expression Web 1.0 designer and install of Expression Web 2 will not change Visual Studio or Visual Web Developer 2008 RTM bits.We share base source code, but each team builds its own copy and authors their own setup. There are various reasons to this, both technical and logistical, such as different teams are using different set of tools. Developer division always dogfoods the most recent compiler, so VS 2008 is built using VS 2008 C++ and C# compilers. However, Expression team does not use "hot" compilers and instead use shipped versions.