According to my source (who is a cast member and has looked into the subject) 1.1 has some new jokes and attractions and one new very nice feature (or bug fix depending on the point of view).
My favorite improvement is his cue that he is no longer in the park, which prevents him from repeating the same joke over and over while in joke mode (and out of the park). He will still repeat things, when inside the park, and he is squeezed.
My 1.0 repeats the same joke, unless I wait a while between jokes (this seems like a long wait although I am certain it is under a minute).
This is a side effect of the useful feature, where Pal will repeat what he last said if squeezed soon after saying something.
With 1.1, if he knows you are not in a park, you can press his hand immediately after a joke and he will tell a new one.
The 1.1 version has a black electronic housing box, 1.0 has a white box.
I don't know exactly what attractions are in 1.1 and not in 1.0
I only have 1.0.
Version 2.0 has:
increased voice volume
6 games
many jokes replaced by trivia, and some new attractions. (25% of content updated).
He interacts with the glow medallions (I don't know what these are)
7 sing-alongs (This might make my old Pal jealous and might even make my interactive Stitch jealous)
He also comes in a removable tux.
More outfits (Safari, pin trading outfit, tourist outfit and Poncho) will be available later in the Summer.
I think that Disney should sell Pal sized waterproof bags (That Pal can see through), near all of the water rides.
When I go in May, I plan to carry all three versions with me, and observe the differences.

Eileen