I know, while most of you are very happy with the new features in Visual Studio 2008, its sad that not all your deployment environments are upgraded to .Net framework 3.5. I had a similar situation as well on one of my projects.
Its great that you can just navigate to a VS 2008 project file properties and from the Application Tab select the Target .Net Framework version to use one of .Net 2.0, 3.0 and 3.5. But this doesn't solve all the problems. You will soon discover that, your application doesn't show an error when you write C# 3.0 code with the target framework set to 2.0. This is because, the IDE by default uses the latest language version by default.
To solve this problem, Navigate to project properties > Build > Advanced > Language Version and choose ISO-2 (or ISO-1). Now with this information, the VS 2008 will start showing compiler errors for features that don't comply to the version specification!
