When you are using the VServer with Virtuozzo 7.5 as virtualization software then you have no chance.
We at www.dotnet-ug-frankfurt.de have the same problems.
I installed the .NET 2.0 Framework in the virtual mashine and the trouble began. It's not only DNN. I installed SQL2005 with ManagementStudio Express. The server is working. But the frontend ... funny effects. When it starts (2 of 10 trys are working) for example then no other programm can be opend. Ther error message is: Not enough memory !

I asked a man from microsoft  at a MSDN Techtalk about that problem. He told me that the problem is Virtuozzo.
On such mashines you have only one Windows installed. This one version will be mapped into the VM's. Evrything you do in the VM is a delta to that one windows version. So is an installation of .NET 2.0 only a delta. If you install it the installer cannot change the files on the host system. The mapping is to slow an than it will crash. If the mashine has enough power then it is working. When the mashine is under heavy load then it fails.

There are only two solutions (if you will stay at 1&1):

1.) use DNN 3.3.4 (.NET 1.1) that is working
2.) rent a root server with WIndows. The funny thing is, that the root servers from 1&1 are preinstalled with .NET2.0

Greetings from Germany
J.Sommer

>What features would I be missing going to 3.3.4?

From the endusers point of view AFAIK  nothing. The both versions have the same functions but they are not code compatible. If you want to do module developement then I think it's better for the future to devolop with the 4.3.x version. Shaun Walker wrote in his last newsletter then 2/3 of all downloads are the 4.3.x version. I believe that the 3.3.x will be stopped in the near future (I do not not have any facts !!!!).

Greetings