What are the steps to updating ASP.NET 3.5 Web application (compiled using Visual Studio 2008) to SharePoint Server 2007?
I'm not sure I quite understand the question. What are you trying to accomplish? Host the web application in sharepoint? If so, i would host the web application elsewhere and use the page viewer webpart to display the site in sharepoint.
Oh yea, now I realize you are the same person that asked the other question I answered ( MOSS 2007 + Visual Studio 2008 : How to I deploy a Visual Studio 2008 Web Application to SharePoint Server 2007 ). Which one of my questions met the need for it to be an application page (_layouts)?
You can't just "move" an ASP.NET application to SharePoint. The security model is different, the navigation model is different, the deployment model is different, etc.
You basically have three choices: