.NET Framework v1.0
The original version of the .NET Framework (early 2001). This has it's own set of assemblies in C:WINNTMicrosoft.NETFrameworkv1.0.3705 - this includes the core functionality such as "mscorlib.dll" and "System.dll". Development for .NET 1.0 will not be supported on Vista.
.NET Framework v1.1
This was the enhancement release for .NET 1.0 and is an entirely new release - although it can and often is installed side-by-side with .NET 1.0 with no conflicts. These components exist independantly in C:WINNTMicrosoft.NETFrameworkv1.1.4322 - this includes NEW versions of mscorlib and System.dll. Development for .NET 1.1 will not be supported on Vista.
.NET Framework v2.0
This was a fundamentally significant release where many aspects of the framework changed. These components exist independantly in C:WINNTMicrosoft.NETFrameworkv2.0.50727 and include a new mscorlib and System.dll. Development for .NET 2.0 will be supported on Vista.
.NET Framework v3.0
This is where the confusion begins. This is NOT a release or update to the core framework. This was instead a release of several .dlls to supplement the .NET 2.0 Framework. .NET 3.0 functionality means that the application is in essence a .NET 2.0 application but supports some new features such as WCF, WF or WPF. These few add-on files mostly exist in C:Program FilesReference AssembliesMicrosoftFrameworkv3.0. Development for .NET 3.0 will be supported on Vista.
.NET Framework v3.5
Unfortunately, the confusion continues here. Version 3.5 is ALSO NOT a release or update to the core framework. There is no 3.0 nor 3.5 version of mscorlib or System.dll. Instead, the 3.5 release put significant core changes into a file called System.Core.dll - and also included several new assemblies. This is a pretty significant release - but it is still fundamentally .NET 2.0 - with some .NET 3.5 assemblies added on. The files for these add-on assemblies are mostly in C:Program FilesReference AssembliesMicrosoftFrameworkv3.5. Also, the installer for .NET 3.5 also installs the .NET 2.0 and .NET 3.0 framework files. Development for .NET 3.5 will be supported on Vista.
Visual Studio .NET 2002 (codename: Rainier)
This was the the first version of Visual Studio that Microsoft released back in February 2002 introducing the concept of managed code for the first time. This version of Visual Studio was based on .NET Framework 1.0. Along with this release Microsoft also introduced the new programming language C# (C-sharp). This IDE is not supported on Vista by Microsoft.
Visual Studio .NET 2003 (codename: Everett)
This was the second release of the development IDE for .NET development. This supports .NET 1.1 only. It also came with built-in support for developing programs for mobile devices, using either ASP.NET or the .NET Compact Framework. This IDE is not supported on Vista by Microsoft.
Visual Studio 2005 (codename: Whidbey)
Visual Studio 2005 can only reasonably create .NET 2.0 and .NET 3.0 applications. Although a developer can technically use functionalty from .NET 3.5, much of the new functionality in .NET 3.5 is based around new features that are available in Visual Studio 2008.
Visual Studio 2008 (codename: Orcas)
At some point in 2009, we will likely get Visual Studio 2008 - which has significant feature improvements for the development environment. Visual Studio 2008 has the ability to "target" version 2.0, 3.0 or 3.5 of the .NET Framework too.