You can have ASP.Net web applications running different versions of the .Net framework running in IIS. The restriction is that a single  process can not load both v1.1 and v2.0, that is, within an application pool all the web applications must use the same .Net framework version.

To change the target ASP.Net version of a web application, right click on the web application's folder in IIS and select properties, ASP.Net tab.