Yes, you can (in my opinion, you should) use the vwd 2008, i am using it with "old" :-) asp.net 2.0 projects.
I want write with 3.5 too and my hosting cant support it yet :-( (shared)
A "website" for visual web developer only a folder, so with "inetmgr" you can switch between asp.net versions and hmm.
(i am installed and using, the vwd 2008 but asp.net 3.5 doesnt appear in inetmgr's asp.net version select dropdownbox)
hope this helps.
Country rises on the arm of diligent people. (Mustafa Kemal Ataturk)