One of the most horrendously thing about ASP.NET 1.1 was that the developers confused a web site and a project. All that did was allow a severe influx of desktop developers into the web world that had no right to call themselves web developers. ASP.NET 1.1 even added resx files for web forms and of course since the file was there, many developers (senior level!) actually thought they were required files. That didn't stop me drop regularly going into CVS and DELETING them. Worthless.
Fortunately, ASP.NET 2.0 fixed this problem by making sure that people realized that a web site was NOT a project. This made everything so much easier to work with. Furthermore, now we had the beautiful CodeFile page directive attribute so that we didn't have to rely on VS for everything. There was also no need for absolutely ridiculous and redundant designer or resources files for web forms. The ASP.NET guys were finally conforming to the preexisting conditions of the web, instead of trying to come up with a new [flawed] paradigm.
HOWEVER! Apparently the ASP.NET 3.5 team fell asleep at the wheel because I'm having horrendous flashbacks to the slop of ASP.NET 1.1. First of all, when you add a web site, you are adding a project. I don't WANT a csproj file for my web site! Secondly, web forms have returned to using the completely useless CodeBehind attribute. It took me QUITE a bit of debugging to finally realize this. Third, every single web form now has a completely meaningless X.designer.cs file. This also took me a while to realize.
I realized this when I kept getting an error telling me that type X.Y didn't match type X.Y. What? Yes it does! After I finally fixed that error (can't even remember how), I kept getting that one stupid error telling you that your type is in two separate places. HOW? This was a new project! I haven't done anything yet! It turns out that the designer.cs file had become out of date between the time I typed up my added my custom control to the page and ran it. Err... what? This is beyond frustrating.
There's good news though. The ASP.NET team wasn't completely asleep. You can add an ASP.NET web site or an ASP.NET web application. Yes, I realized there's no REAL difference, but for some reason they decided to make a whimsical split (I suspect it was a political or PM decision-- the ASP.NET team is smarter than that). Perhaps they wanted to aid the old VB developers, who I would argue have no right to put things on the web anyhow (i.e. they are web coders, not web development professionals!)
If you add a ASP.NET web application, you get the old ASP.NET 1.1 style of hard to use nonsense. On the other hand, if you add a ASP.NET web site, you get the appropriate ASP.NET 2.0 style. Personally, I say forget both. I always just create a folder and then "open web site". Done. Most of the time, however, I just start a project by checking my continually changing solution template out of subversion. Again, DONE. This is why it took me 8 months to finally notice this. I don't even want to think about how many sloppy intern or VB6-developer created applications I'm going to have to clean up based on this painfully flawed design.