I've used the 1541 program with a 1020 (I think that is the 5.25 drive) to make D64 images. Worked fine on my 2000/060. You do need to play with the drive speed a little, though. IIRC, there is a program in the package to help with that.
Also, I had a 5.25 drive (probably still have it here in a box) which formatted HD disks at 880k, so it pretty much looked just like a 3.5 drive to the system. Another neat feature was the drive change triggered with the write protect.
