If you use the ASP.NET Project update tool , you can only do the second path right now, as indicated in this blog :
The tool does not support Visual Studio 2008 solutions, MVC 1 projects, or projects targeting .NET 3.5. If you have an MVC 1.0 project, you can use the old version of this tool to convert it to MVC 2.
I assume that you can manually upgrade directly to MVC 3, but why do you need to solve the problem when you can run two wizards to update the project for you.
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