The MSBuild files for Silverlight 1.1 were tucked inside of the MSBuild's Visual Studio folder. Now they are in their own folder.
If you try to open up a project created with Silverlight 1.1 in VS2008, you will get a message that the C:/program files/msbuild/microsoft/visualSutiod/v9.0/Silverlight/Microsoft.Silverlight.Csharp.targets (or VisualBasic.targets) file can't be found and you won't be allowed to open the project.
Click OK to let the solution load.
In the Solution Explorer you should seethe project listed but unavailable. Right click on it and choose the Edit option. The project's MSBuild file will open.
Scroll down until you find the Import Project= element that points to the targets file.
All you should have to do is replace
"VisualStudio9.0/Silverlight/"
with
"Silverlight/v2.0/"
Then you can reload the project after saving.