When .NET 2.0 was introduced, quite a long time ago, the whole System.Xml namespace was re-written, due to the poor performance of the System.Xml implementation. Despite the fact that the CLR 2.0 has been around for a few years there are still implementations using CLR 1.x and especially the XSL transformation bits, since that part is completely re-written and marked as obsolete.
But note that they are only being marked as obsolete! You can still compile and run most of the code with just a compiler warning. The old .NET 1.1 classes are still in the CLR 2.0, so you can convert your XSL transformations piece by piece and start using .NET 2.0 or even .NET 3.5 since it is based on .CLR 2.0 (read this post by Scott Hanselman to get a better understanding).