no, there are no functional differences, we keep both codebases syncronised. At some point in the future we will stop developing the asp.net 1.1 codebase, and move exclusively to asp.net 2.0, as it's a large overhead on project resources.
At the minute, the core modules are all asp.net 1.1, and can be compiled/debugged only in vs.net 2003. For asp.net 2.0, we have runtime compatibility, but you cannot compile or debug core modules without some work (rearranging file structures etc.). If you want to develop new modules, targetted to asp.net 2.0, then vb express/c# express are excellent tools for RAD development, particularly as the templates do much of the boilerplate code for you (see http://forums.asp.net/thread/1114393.aspx for more details).
The advantage of the express tools are that they are free, if you feel they're too limiting, or you want to upgrade to vs.net 2005 (or one of the team editions) to access additional functionality, your express projects can be opened in vs.net 2005, so you haven't lost any work.
Cathal
Cathal