This was a frutrating one, and since 2.0 is so new, I couldn't find anything about this on the web. But eventually, I figured it out...
The answer is that you can not specify the web.sitemap in the data source controls. It is actually the default, and ASP.Net 2.0 selects this automaically. If you try to tell it specifically to look for the default it has an stroke. Hope this helps.