Domain functional level effectly only the domain controllers. If you have all Windows 2003 DCs then you'll be fine. All you are doing is removing support for Windows 2000 DCs.
Denny
MCSA (2003) / MCDBA (SQL 2000)
MCTS (SQL 2005 / Microsoft Windows SharePoint Services 3.0: Configuration / Microsoft Office SharePoint Server 2007: Configuration)
MCITP Database Administrator (SQL 2005) / Database Developer (SQL 2005)
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