It really depends on the project, who it's intended for, and what it does.
It would be safe to guess that the .NET Framework 2.0 is on many more computers than version 3.5.
Additionally, is there anything you need from .NET 3.5 that isn't available in 2.0 (such as LINQ)? If you are dealing with a lot of queries and data, I would switch. But again, depends on the customer and if you intended to maintain this application for the foreseeable future.