Hello,
IIS is VERY finicky about your configuration. If you have 2 application pools defined (1 for 1.1 and one for 2.0) they must not ever mix. For example, on my server I have a mix of .NET 2.0 and 1.1 sites (and some in virtual directories), but if I accidentally assign a .NET 2.0 site the 1.1 application pool - than ALL the 1.1 sites across all of IIS break.
So you must be careful that in the properties of the 2.0 site, it is using the 2.0 application pool (and that no 1.1 sites are pointing to that pool across your IIS server), and in the virtual site properties that the 1.1 site is using the 1.1 application pool (and that no other 2.0 sites are pointing to that pool across your IIS server).
If you have that configured, and you have stopped/started IIS, it should be working. If not, maybe you can post some screen shots to a URL of your AppPools, Site and Virtual Directory Properties, etc... ?