Migrating from 1.1 to 2.0 (and higher) is a must.

The most obvious benefit I see on top of my head, without much thinking is the use of generics which was introduced by the CLR 2.

And don't forget support for 1.1 has simply ended, see here: .NET 1.1 mainstream support ended in 2008

So the question would better be "what are the risks"? Here is a document on this subject: Microsoft .NET Framework 1.1 and 2.0 Compatibility.