I used to develop Workflow Designer few years ago (plus some components close in functionality, such as 2D CAD, plotting, etc.) -- it was Borland Delphi. Based on my experience, I would use WPF, but then you need .NET Framework 3.5 or 4.0.
Please see my previous answer -- to this question:
How to draw a 2D line plot using C#?[
^]. In that answer I overview what's involved. With v.2.0 you're bound to
System.Windows.Forms
, which I also consider.
You could also try and find some component library which could help you. At this moment I don't know anything I really like, but maybe this is because I keep in mind nice patterns to use, so I would do it from scratch. WPF is really powerful and much more oriented to diagramming compared to traditional rendering/drawing approach.