I recently downloaded Microsoft's new Visual Web Developer 2008 Express Edition, which is a cut-down free version of Visual Studio aimed specifically at ASP.NET web developers. It supersedes the last version (VWD 2005) and adds new functionality.
I didn't remove the old version before installing, and in doing so noticed, and was able to verify (with screen shots below) that support for building mobile websites has been removed in the latest version, at least that's what appears to have happened!
Visual Web Developer 2005 - Add new item dialog box
Visual Web Developer 2008 - Add new item dialog box