One thing that was painfully lacking in Visual Studio 2003 was the ability to work with XML and XSLT. Most people opted to purchase third party tools like XML Spy to deal with VS.NET's inadequacies. However, Visual Studio .NET 2005 has a group of new tools that add things such as XSLT debugging and Intellisense that make working with XML related files much more tolerable.
In addition, the .NET Framework 2.0 has undergone some significant improvements in the System.XML namespace. If you work with XML on a frequent basis, you'll want to be sure to read through these MSDN articles and see what's new in version 2: