Yes, project files between 2005 and 2008 are compatible. There is no solution, but they are easy to remake or copy. There is one file with project files if you use web application projects. Two versions indicate different MSBuild target files. Stephen Harman has a hotfix blog to add to the project file .
As long as you are not using anything new from compiler 3.5, you should be good. Note that even if you target 2.0 Framework, the compiler will still accept 3.5 syntax (var, object initializers, etc.), so you still need to know about it.
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