Targeting SP1 in Your Applications...
It may come as a surprise to you but you actually can't target 3.5 SP1 in your applications from the drop down list for Mulit-targeting. However, it WILL be "automagically" selected when you choose a dependency that requires it. Want to find out more? Check out these links:
.NET Framework Multi-Targeting Overview
http://msdn.microsoft.com/en-us/library/bb398197.aspx
How to: Target a Specific .NET Framework
http://msdn.microsoft.com/en-us/library/bb398202.aspx