My application uses 2.0. At some point in the future I may want to start using newer features added in later framework versions. Should I wait until then? Or are there advantages to updating to the latest .NET 3.5 now?
I suppose by the time I am ready for next spring's release 4.0 will be out. Perhaps I should stick with 2.0 for my fall release and save my customers the HD space and install time of another framework version?
I agree that you should with what your App needs, but you should also prepare for what your apps will need in the future.
If you have a few spare cycles, you could migrate a separate branch of your apps in your SCM which is running with the 3.5 Runtime and when you actually need to upgrade, you have a working branch (Assuming that you keep it up-to-date with some bi-weekly merge).
Remember that "a small burden" to users could mean the difference between acceptance and rejection of your application.
I run IT for a company. Our company standard is not 3.5. You would have to have one really slick application to get me to upgrade everyone to .NET 3.5 just so your app can run. In other words, probably not happening. I'll find another app that doesn't add an additional "small burden" onto our already overloaded IS department.
Somebody else commented about what features are you really going to use. If 1.1 or 2.0 has the real feature set you need stick with it.