Migrate libraries from the Base Folder - If you have created mlib/plib files in Flamingo 1.1 (or in Flamingo 1.0 if there is no Flamingo 1.1) that have names different from the standard libraries, and they are in the Base Folder location, they will be copied to the Base Folder location for Flamingo 2.0
Migrate the library User.mlib - If you have added materials to the User.mlib file in Flamingo 1.1 (or in Flamingo 1.0 if there is no Flamingo 1.1) and there is no existing non-empty Flamingo 2.0 User.mlib, the installer replaces the empty 2.0 User.mlib with the earlier User.mlib.
The installer preserves the material libraries from earlier Flamingo 2.0 versions, unless your customizations were made to the library “User” or any of the other standard libraries that Flamingo installs. Then those changes should persist, but to be safe please back them up before installing Flamingo 2.0.
Depending on your old version of Flamingo 2.0 the standard libraries should be in …Documents and Settings\All Users\Application Data\McNeel\Flamingo\2.0\English\Libraries or the equivalent for your language like …2.0\Deutsch\Bibliotheken. (Application Data is usually a hidden folder, but it's really there.)
If your customizations were in libraries you named, like joe.mlib, then those files will not be touched (unless at the start of the install you choose Clean Uninstall, which does not happen unless you choose it).
The current Flamingo 2.0 places new libraries you create in …Documents and Settings\All Users\Application Data\McNeel\Flamingo\2.0\Resources, or wherever you have Base Folder set. You set BaseFolder at Rhino > Tools > Options > Flamingo (the one near the bottom).