.Net 2 web app and Reporting Services (both SQL 2000 and SQL 2005)... Can it be done?

My setup:
.Net 2 web app running in [localhost] with AJAX extensions.  2 virtual web folders Reports and ReportServer for Reporting Services in SQL 2000.  I understand that RS (Reporting Services) for SQL 2000 only runs in .Net Framework 1.1, so I have set both Reports and ReportServer to run in a different application pool [ASP.NET 1.1] and set their .net Framework to 1.1.  But when I try to load a report through our app or try to load the Reports folder it reports and error in the web.config of our web app in localhost.  The error in the web.config is something specific to .net 2 or Ajax or ReportViewer.

If I am correct, the ReportViewer that comes with VS2005 works only with SQL Server Reporting Services 2005 and that is fine, I guess.
But my BIG question is why is the Reporting Services app, in virtual folders that are running in a different application pool then the root web app, inheriting the configuration from the root web app?  Can I stop this from happening?
Is it possible to have our .net 2 web app work successfully with Reporting Services (SQL 2000) in virtual web folders?
Prior to all this our web app was .net 1.1 with only SQL 2000 and Reporting Services and all was fine.  But we have been upgrading our app to .net 2 and also want to support SQL 2005 and Reporting Services.
Any thoughts, ideas and suggestions are greatly appreciated.
Jim
 
Jim
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