There is usually no real need to upgrade beyond 2.0 for DNN 4.x installations.  Some have reported apparent speed increases for certain tasks (such as in this thread). There are a few modules that require 3.5 but at the moment you're generally fine with 2.0.  Also note that some existing third-party modules may NOT work under 3.5 (example: Engage's PUBLISH did not support 3.5 as of version 5.2.2).
 
The latest version of DNN (5.1) will require the 3.5 framework plus you should expect future modules to begin requiring this more often.  Under 4.x if you don't purchase many modules then you're probably fine with 2.0, otherwise moving to 3.5 could help to "future-proof" your setup (and make it easier to eventually migrate to 5.1+).
 
Personally, I've had no issues moving to 3.5 for core DNN code for DNN versions 4.6+ but I have seen some limited problems with custom-written (third-party) code recompiled under 3.5.  If you don't have the source code for a module then you're probably ok -- it's when you recompile under 3.5 that you run the highest risk of encountering errors.  On that note, always always try things out first on a separate, offline copy of your production installation!
 
Hope that helps-
-mamlin

DNN 5.1.0 does provide automatic upgrade to ASP.Net 3.5, if present and will issue a warning, if not, stating that DNN 5.2 will require ASP.Net 3.5 SP1.