So we have a few service packs to talk about....
Firstly, Visual Studio 2005, SP1 is now in beta testing. This is a fairly big service pack, lots of bug fixes, and the odd new feature. The list is not complete of things fixed yet but Microsoft promises to update that list when they ship. You can read the announcement here and if you like, register for the beta on the Microsoft Connect Site. In that announcement, Soma also goes on to talk about Vista support and what that means for Visual Studio 2002, 2003, and 2005. Keep in mind, this has little to do with your applications running on Vista - but is about running the development environment on Vista.
Secondly, Brian Harry anounced the beta availability for Team Foundation Server SP1. You can register for the download on the Microsoft Connect Site. I'm most thankful for full-fledged extranet support. As you may know, there are some security hiccups when not using a VPN and trying t pass through a variety of firewalls/proxy servers. This one should have been in the 1.0 release in my opinion, but better late than never.
I do a fair amount of Work Item Type customization for customers so I'm pretty excited about the ability to create custom controls on your work item forms.
Other notable improvements: Better performance and scale, Excel/Project 2007 Support, Support for the new Web Application Projects.
I have it on good authority that you don't have to worry about what version of the client you have for compatibility with the server. So feel free to mix and match, you know, like Garanimals.
You'll find increased scalability and better performance with Work Item Tracking, Version Control, and the Data Warehouse.