I had the same question when I moved from Classic ASP to .NET 2.0... .NET is huge: so where should I start?
What i did was put my hand dirty and started slow, take a project (in my case was a very important project - a finance web app that would cover and automatize all 4 persons work) and start to implement, every time I didn't know how to accomplish something or I had an idea in ASP but not in ASP.NET I would go to www.asp.net or 4GuysFromRolla website and search for examples, copy/paste, understand what I was doing and ... continue to the next wall.
Took me 6 month to have everything up and running but was worst it! now that passed almost 3 years I know I did the right choice but back then ... I was scared!
now... you refer .NET 3.5, it has a bunch of new things like extensions, linq, etc... I would go by the simple part and when the times comes, "maybe I can use LINQ here, let me search how to use it on this part"
hope you follow your own path and buy some reference book so you can read something new and have a reference whenever you need "ahhh, I read this somewhere in the book, let me search... where was it?"
I bought Professional ASP.NET from Wrox as a reference book, and even today I go there to see new things, even when I'm started to use .NET 3.5, the idea is there, there is only a new way to accomplishing it.