So far as i know, yes

Indeed, its a requirement to do reporting services web parts on moss
(well, the reporting server  needs to be 2005 sp2  anyway) and so i'd have
thought it would have had to to work in a small implementation

Yes it will, I have a few test servers here that have it on and they all
work fine. No problems what I can tell. And of course as mentioned before you
will need this for the reporting services integration if you decide to use it.

It should be noted that the functionality of SQL server  really didn't change
between SP1 and SP2 except that now Vista users can load SQL Server 2005
onto their desktop machines... In terms of tables, stored procs, etc. no
changes were made and you should be golden.