I went through this process on a fairly large-scale enterprise application (Winforms, strongly typed datasets, web services, etc). The migration wizard did not take care of everything but the remaining changes were minimal. We had some class name collisions with new classes in the .NET 2.0 framework and we had to rebuild our datasets and web service references along with some file path references (which changed because of the new-style web folder). But everything was actually surprisingly smooth. .NET 2.0 actually exposed some bugs in our applcation (cross threading/calling into UI controls from a worker thread) but overall it was very painless.
The best advice to you is to just try it and see what happens. What kind of scale are we talking about here? In our case it was ~20 projects worth and like I said, we only had a handful of issues.