<p>I am currently working on a project that is moving from .NET 2.0 to 3.5 across the board.</p>

<p>I am well aware that 3.5 is basically a set of added functionality (libraries, if you will) on top of what 2.0 offers.</p>

<p>Are there any gotchas that I might hit by simply re-targeting the compiler to 3.5?</p>

Nope
3.5 is completely compatible with 2.0, not the other way around of course