"The Myth of 3-Tier" is reality here - I do use 3-tier in fact even more tiers (or layers? :) ) architecture in real life asp.net applications, and this approach works well here. Yes, and no ADO.NET data sets at all.
We have got released rather large ASP.NET 2.0 app last week, which got about 3000 logins since, it's working well so far...
I must say it's only second my ASP.NET 2.0 app and the first large one - and I'm very impressed how good ASP.NET 2.0/.NET 2.0 techology are, when programmed and tested carefully...