depends what you want to do.
Express editions or rather .NET 2.0 would be the way to go since there are alot of improvements and additions to the framework than .NET 1.1
VS2003 will only use .NET 1.1, not 2.0.
Express editions do have limitations on what you can/cannot do. Really depends what you wish to do :-)
you could develop the entire solution in VS.NET 2003, then convert it to VS2005 Express and use it that way, perhaps find better ways of doing what you want to do, if not, then at least you have a solution there.
I would advice if you are going to be doing some serious development, to stick with .NET 2.0 but also invest in VS2005 Pro/Standard, as everything is in one environment and has many more features, unlike the express editions since they are stripped/lightweight editions of VS2005
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