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.
