I really don't know why it doesn't return any result for ".net cf".
About your question, yes you can use .Net CF 3.5 instead of .Net CF 2.0.
If you want to run the device IDE with .Net CF 3.5 you will need to follow the instructions on this thread:
http://www.basic4ppc.com/forum/quest...-1-net-cf.html
BTW, I've found this page with google, querying site:basic4ppc.com/forum .net cf 3.5