Recently, we just fixed a nasty vertical integration / application isolation bug. The problem occurs when you:
VS 2005 will fail. What happened in this situation is that by default, the 1.1 SDK is installed to an \SDK\v1 directory and the 2.0 SDK is installed to the \SDK\v2 directory.
The \SDK directory is the directory that VS keys off to determine where the SDK is installed. In this case, since the 2.0 SDK is installed, VS will lock the installation path to where the 2.0 directory is. In this case, that happens to be the \SDK directory which is also where the 1.1 SDK is. VS also has conflicting logic which doesn't allow it to install on top of a location where the 1.1 SDK is installed.
This leads to an error during VS installation.
I'm glad we ended up fixing this and finding out what the problem was.
We did have an internal debate on how common this scenario is. If you think you'd actually run into this scenario, let me know. I'm really curious if there are a lot of folks who install the 2.0 SDK on top of the 1.1 SDK, and then install VS.