SQL 2005 can read SQL 2000 databases (and database backups) just fine. When I
upgraded mine I shut down the WFEs, dismounted the databases then shut off my
SQL 2000 box. My database and log files were on a SAN. I wiped the SQL 2000
box and reinstalled it with the same name and with SQL 2005. After I got it
patched up I mounted my SAN drive and loaded all the databases back up. I fired
the WFEs back up and everything was good. They were still pointing to the same
SQL server instance (since the name hadn't changed) and the same database names.

One thing I would have done differently, that probably doesn't apply to you, is
that I would have shut Full Text Search off in WSS before I took it down. A lot
of the FTS stuff is stored on the local drives of the SQL server and that caused
us some problems. I don't think SPS uses SQL FTS so you might not have that
issue.

SPS doesn't use SQL FTS for items it indexes using the SPS search
indexer, but it does continue to use it for individual site searching
for any site that's not in an Area (e.g. the /sites/ path is the most
common).

In that case definitely disable it in SPS if you can, and if you can't disable
it in SQL and reenable once 2005 is installed. We spent weeks, probably months
a while back trying to recover from this when we rebuilt a SQL 2000 machine.
When I did the SQL 2005 upgrade I didn't make the same mistake.