Upgrade from Windows Server 2000 to 2003 in 10 steps

1) Install the new Windows 2003 server
2) Install a VM on the new server port 1024
3) Install and configure an exact same version and SP as the old server
4) Backup VHD, and put VM in undo mode
5) Joint the VM new server to existing domain
6) Transfer roles to the new VM server master
7) Run adprep (inside i386) on the VM server to upgrade server schema, to update schmm use regsvr32 cmd schmmgmt.dll then mmc
8) Upgrade Windows to 2003 R2
9) Joint the new server to VM
10) Transfer roles to the new server

Note GC update takes time, be patient

Further reading
http://forums.techarena.in/showthread.php?t=65268

FSMO movement:
http://support.microsoft.com/default...roduct=win2000

FSMO placement:
http://support.microsoft.com/default...b;en-us;223346

Seizing roles. You don't need (and don't want) the original server online when seizing an FSMO role. To seize the roles, you run ntdsutil and bind to another working DC and then seize from the DC that is no longer up (and never should come back up ever again after the roles are seized).

Using Ntdsutil.exe to seize or transfer FSMO roles to a domain controller
http://support.microsoft.com/?id=255504

Flexible Single Master Operation Transfer and Seizure Process
http://support.microsoft.com/?id=223787