<p>We're moving a solution with 20+ projects from .net 2.0 to 3.5 and at the same time moving from Visual Studio 2005 to 2008. We're also at the same time switching from MS Entlib 2.0 to 4.0. </p>

<ul>
<li>Is there any reasons not to let the
Visual Studio wizard convert the
solution for us?</li>
<li>Is 3.5 fully backwards compatible
with 2.0?</li>
<li>Is Entlib 4.0 fully backwards compatible
with 2.0?</li>
</ul>

<p><strong>Edit:</strong> I might been a bit confused when I wrote this, the backwards compatability is supposed to mean; is there anything that exists in a 2.0 project that will not work/compile in 3.5</p>

<p>:)</p>

<p>//W</p>

I upgraded several projects from Visual Studio 2005 to 2008 with the Wizard, and they all went painless (well... except for that C++ beast. But you're talking about .NET anyway).
Keep in mind that you don't need to upgrade the .NET version. Visual Studio 2008 supports .NET 2.0, 3.0 and 3.5. However, 3.5 is backwards-compatible anyway, since it sits on the same CLR and is, more or less, just some extra libraries. And the "old" libraries stay the same.
I don't know about Entlib.
Why don't you just try and run your unit tests? :)