[Swampdude]

Think of Mechanical Desktop as a parametric add on package to regular AutoCad. So when you installed the 2004 Desktop - you installed AutoCad 2004 with the Mechanical Desktop add on package. Then you apparently also installed AutoCad 2005. So the Desktop package won't carry up to the 2005 installation. So you've really got 3 different things there. If you want to use all the extra features Desktop has then I'd stick with the 2004 installation.
Desktop comes with lots of 3d hardware, it does some FEA analysis. It allows much more capability in modeling that regular AutoCad can't do. Then formost it lets you constrain your detail and use parametric dimensioning. Plain AutoCad draws unintelligently. Also Desktop has some great features for detailing and drawing setup.
There weren't that many changes from 2004 until now (v2006). If I were you I'd play around with the Desktop. There's more to learn and it's a much more powerful tool. Here at work we just use regular AutoCad for the streamlined simplicity and commonality though. Most industry also keeps the standard AutoCad for drafting. It's unfortunate to see all the capability lost in appealing to the lowest denominators of industry. AFAIK the same applies to inventor. Industry isn't ready to switch over to Inventor no matter how hard Autodesk pushes. Autodesk wants to quit production of Mechanical Desktop and get us all on Inventor, but we love our Desktop too much. Inventor is a whole nother animal, and when you've been creating products from AutoCad for years and years, you can't just switch to another software that's not compatible without heavy refit and training costs.
That's too much info but a good lesson in the why's of what you're asking.