The Moth

I have no reservations in describing the move from Visual Studio 2005 to Visual Studio 2008 as a "no-brainer upgrade". The latter is a superset of the former and given framework multi-targeting and the layered approach of Framework 3.0 and 3.5, it makes perfect sense to move your development environment over and, when you are ready to change your deployment, seamlessly take advantage of a new .NET Framework 3.x

But how about those people still using VS.NET 2003 (shocking I know :) who wish to take advantage of the VS2008 enhancements and move closer to our latest platform? That's a different kettle of fish. The issue there is that: you are on a different CLR version (1.1) which has some breaking changes compared to the CLR 2.0 (which is used by Fx 2.0/3.0/3.5). You are also on a different framework version (1.1) which has some breaking changes compared to Framework v2.0 (which is also an essential part of Fx 3.0/3.5). There is no reason for you to go to VS2005 as an intermediate step, so by all means go from the IDE of 2003 to 2008, but be prepared to face all the issues people faced when they moved from Fx 1.x to Fx 2.0.

I thought I'd resurface below some links to documents that help people move from v1.x to v2.0, the first two being the most important ones IMO:
- Design time Breaking Changes in .NET Framework 2.0
- Runtime Breaking Changes in .NET Framework 2.0
- Microsoft .NET Framework 1.1 and 2.0 Compatibility
- Compatibility Testing Scenarios

Also note that if you search you'll find plenty of issues in particular for web projects since the project model fundamentally changed from VS.NET 2003 to VS2005. It was later amended via separate downloads for VS2005 but since you are moving to VS2008 you don't have to worry about that (both web site projects and web application projects are included out of the box with VS2008). So, just one extra link for you pre-ASP.NET v2.0 devs:
- Feature changes in ASP.NET 2.0

A much older blog post on the same topic may also be of use to you.