I do .NET 1.1 in VS 2003. Because our client said so.
Our client want it to run on any PC with a XP SP1, and also wants it to be < 3MB. Which is not unreasonable, I suppose.
.NET 2.0 runs on Windows 98, I think. Definitely Windows 2000. The runtimes are about the same size for 1.1 and 2.0, and the compiled assemblies aren't much different either; in fact, because of stuff like generics, they're probably smaller in 2.0.
But generics and all that jazz aren't available in 1.1 - and 2.0 doesn't come as part of the SP1 download. Which is kind of the point.
Oh, right, I sort of get you. Although corporate systems sans SP2 boggles the mind.