Sort of.. but not really. They're designed to sit side-by-side, just like
v1.0 and v1.1; however, some v1.1 code will run on the v2.0 framework.
(There's no guarantee, however.)

A lot of v1.1 based code will -not- run on the v2.0 framework and will
expect to see the v1.1 framework. There is an admin setting where you can
tell the v1.1 apps to use the v2.0 framework, but I don't recommend doing
that unless you're extremely familiar with the .NET Framework -and- you have
sufficient resources to thoroughly test the execution of your v1.1
application in the v2.0 framework environment.