I'm cc'ing our resident SQL Expert. He should know.

Short answer: You will have to backup the databases, change the default
locations and the model DB settings, then restore the databases. But, I am far
from a SQL guru and there may/must be a better way.

I figured it would take something along those lines, but I also don't want it to
impact our MOSS install, as far as getting it pointed in the right place for the
right database. I expect that I will have to detach, move  and then re-attach,
and that isn't that difficult to do, but I have learned through experience that
MOSS doesn't like to be played with, so I want to be sure that I have those
settings accounted for also.

For the most part SharePoint doesn't care much about its databases
outside of the SQL instance  they are on and their name in that instance.
It doesn't know where that database  lives in the file system, nor does
it care.. Backing up the database and restoring it as the same name, but
in a different level in the file system is fine. SharePoint doesn't
care. I'd stop all the SharePoint and IIS services before I did it
though.

I went through something similar. We had implemented a MOSS
development environment including MS SQL on VMWare. When we really
started using the development environment it was very slow and the
major issue  was on the SQL server. We migrated all of the databases
from the VMWare SQL server to a physical server, we made the
physical SQL server have the same name as the VMWare one did and
there was no issue.

Here are the high level steps we took:
1) Shut down the moss  servers.
2) Renamed the VMWare SQL server.
3) Detached the DBs on the VMware SQL server
4) Copied the DB files  from the VMWare SQL server to the Physical
SQL Server
5) Renamed the physical SQL server to the VMWares original name
6) Attached the DB files on the physical SQL server
7) Booted the MOSS servers.

So as long as you don't change the content/schema of the DBs and the
names that the DBs and servers are known by you you should be able
to do anything you want on the SQL server side.

That will work for now. I will eventually want to change the instance  and the
db name, but this is more crucial at the moment.

Changing the instance  is easy, use a SQL alias using cliconfg.exe.

Instructions for changing your SharePoint configuration database  name
in SQL server:

SQL Administrator can perform the following:
1. Backup current configuration database from the existing SQL server
2. Restore the backup onto the existing SQL server specifying the new
name of the config  db. During restore specify new location of
database files.

SharePoint Administrator can perform the following:
3. Run the following stsadm commands to complete the move:

stsadm -o deleteconfigdb (Note: the deleteconfigdb does not
actually delete the database from SQL server, it simply disconnects
the database from SharePoint)

stsadm –o setconfigdb -connect –databaseserver SQLServerName -
databasename newdatabasename -farmuser your_farm_sql_account -
farmpassword your_farm_sql_password