From Scott Guthrie's blog:
Previously we've been referring to this .NET-enabled Silverlight release as "Silverlight V1.1". After stepping back and looking at all the new features in it (the above list is only a subset - there are many more we aren't sharing yet), we've realized that calling it a point release doesn't really reflect the true nature of it. Consequently we have decided to change the name and refer to it as "Silverlight V2.0" going forward.
The fact that there are as yet unannounced features in the pipeline makes Silverlight development even more appealing.
The managed framework features alone were always enough to make Silverlight 1.1 sound like it was a lot more than a point release.