What the Help says about it:

Delphi 2.0 is fully compatible with Delphi 1.0. To make your 16-bit Delphi 1.0 application into a full 32-bit application, you just recompile it with Delphi 2.0. However, some code changes might be needed to accomodate Delphi's new data types and new Windows features. The following VBX controls which were included with Delphi 1.0 are not included in this version of Delphi. You cannot compile a Delphi 1.0 project with Delphi 2.0 that uses any of these components: You can share both source code files and forms between 16-bit Delphi 1.0 projects and 32-bit Delphi projects, provided that none of the components listed above are used in the code or forms.

Note:
You cannot conditionally compile a unit for both Delphi 1.0 and Delphi 2.0. For example, you can't use compiler directives such as $IFDEF in a single source code file to use a TTabbedNotebook for Delphi 1.0 or a TPageControl for Delphi 2.0. You can't share a .DPR project file between Delphi 1.0 and Delphi 2.0 because the associated .RES resource file must be 16-bit for Windows 3.1 and 32-bit for Windows 95. Instead, you must create a new project file with Delphi 2.0 and add forms and units to it as needed. Maintain a separate project file for Delphi 1.0.

Delphi 2.0 has merged the WinTypes and WinProcs units into the Windows unit. To facilitate your migration, Delphi aliases the two obsolete units to the new unit so your port appears seamless. This also enables you to install your 16-bit components into the component library, CMPLIB32.DCL.

Warning:
You can open a Delphi 1.0 project file with Delphi 2.0, but if you recompile or save any changes, you will no longer be able to use the resource file (*.RES) with the Delphi 1.0 project. Backward compatibility is not maintained for resources. In order to handle a 32-bit return value the optional last parameter of the BlockRead and BlockWrite procedures is now of type Integer. In Delphi 1.0 the last parameter was of type Word. The Count parameter is also now of type Integer.