If memory serves me correctly...
- they dropped XQuery support as the standard is not yet finalized and won't be in the time frame of Visual Studio 2005
- however, they kept a subset of it that most likely won't change and implemented it in the SQL Server 2005
- what they (Microsoft) most likely dropped in general - not just for 2.0 - (if I understood correctly) is XPath 2.0 in favor of XQuery because the syntax of XQuery is supposedly a lot more natural to the majority of developers
Personally, I have had bad experiences with Microsoft's earlier attempts to implement not-yet-finalized specification (XML Data Reduced, anyone?) so I'm glad that they decided to wait for the final spec this time.
