As the title says upgrading your pre 2008 device solutions to Visual Studio 2008 and to run under the .NET CF 3.5 is a two step process. This is because Visual Studio 2008 supports multi-targeting.
By default when you upgrade your VS 2005 projects to VS 2008 they continue to target the .NET Framework 2.0. This is true for both desktop and devices. This article quickly talks about how you target the new frameworks after conversion.
1. Open your VS 2005 solution in VS 2008. The conversion wizard will load, simply run though this.
2. This particular solution contains device projects as well as desktop projects.
3. As you can see, after the project has been converted, it is still compiled against the CF 2.0.
4. In VS 2008 there is a new menu option labeled "Upgrade Project" (among others) under Project or the same option can be accessed under the context menu by right clicking the project.
NOTE: This new option is only visible to device applications.
Clicking it will upgrade your Compact Framework 2.0 application to compile against the Compact Framework 3.5.
5. Clicking the "Upgrade Project" menu option will prompt you to continue.
Once you have clicked Yes, the process is very quick and does indeed upgrade your device application to compile against the CF 3.5.
6. After doing the above you will notice the "Upgrade Project" menu option will disapear from the project context and main menus.
Although this post is mainly about devices I thought I'd mention converting your desktop applications from .NET Framework 2.0 to .NET Framework 3.5 is slightly different. There is no "Upgrade Project" menu option for desktop projects, instead you have to use the muli-targeting support features under project properties to target the .NET Framework 3.5.