It appears that there are some changes in .NET 3.5 System.Transactions (or System.Transactions.dll and System.Data.dll version 2.0.50727.1433 if you're looking at assembly versions). Florin Lazar blogs about a change to the syntax here. And Alazel Acheson blogs about changes to SqlClient changes to accomodate using lightweight transactions with less promotion to distributed transactions in the ADO.NET Team blog.

It is interesting to read how the latest version of SqlClient can combine automatic transactions with connection pooling to use promotion to a distributed only when necessary. It was reminiscent of how COM+ used the connection pool; the difference is that COM+ always used distibuted transactions. Some of the changes use a transaction-aware connection reset mode that's only supported in SQL Server 2008. So server changes were required as well.

At the end of the blog entry Alazel mentions that you can't use this facility with two open connections at the same time; it requires that there is a free connection with the appropriate transaction scope in the pool. I immediately thought of SQL Server's sp_getbindtoken and sp_bindsession, the manual way to allow two connections to share a single transaction context. But sp_getbindtoken and sp_bindsession are on the deprecation list (to be removed in a future version of SQL Server) in SQL Server 2008. The books online entry for these calls recommends "using MARS or distributed transactions instead". But why MARS?

MARS (multiple active resultsets) made its appearence in SQL Server 2005 and its data access stacks. It permits you to have multiple interleaved sessions while using a single SQL Server connection. These multiple sessions share the same transaction, modulo an interesting but escoteric behavior known as batch-scoped transactions. MARS also does not support named savepoints.

What MARS and sp_getbindtoken/sp_bindsession have in common is that they are both solutions to the same "problem". I prefer calling this a SQL Server "behavior" because its not technicall a problem, just how the underlying network stack works. SQL Server does not allow other activity on a connection (like an UPDATE or a second SELECT) while reading a rowset is in progress. Pre-MARS, if you wanted to have multiple commands in a single transaction scope, you would use two connections and "bind" the transaction scopes together with the transaction token. With the MARS capability this is no longer necessary.

So, the OpenConnction1/DoCommand1/Close then OpenConnection2/DoCommand2/Close pattern is now acommodated by System.Transactions and SQL Server 2008 without transaction promotion. To do two commands with the same transaction scope without closing the connection, use a single connection and multiple sessions with MARS. With either data access pattern, only a single physical connection to SQL Server is needed.