Peter Laudati has an excellent post discussing the ins and outs of getting code across from 1.1 to 2.0. One thing that I wasn't aware of was that the ASP.NET team recently released a new Web Application Project template for VS2005 that essentially replicates the ASP.NET 1.1 project model, making it easier to bring web projects into the 2.0 world (without going through the migration wizard). Check out ScottGu's post on this here, as well as the Web Application Projects white paper on MSDN. Finally, for more information on migrating .NET web apps, check out the beefed up ASP.NET team migration site here.
Peter also sagely points out something that often gets lost in the noise and excitement as new versions of technology are rolled out: if it aint broke, don't fix it :) There are lots of compelling technology reasons to upgrade to 2.0, but unless you can scrape back some of the upgrade costs through reduced operating costs (increased developer productivity on sites that are being constantly maintained/revisioned springs to mind), then it's usually better to leave 1.1 sites as they are.