You can't run an upgrade on the server to SBS.
Probably the best way to transition would be to bring in your own temp box, install W2K3 server on it, add it to the domain, and make it a DC. Then migrate your file shares to it and your FSMO roles. Then demote the old server. Then format and reinstall SBS on the old server (using the same server name as before), but don't do the full SBS install. After setting the time zone stuff, there is a reboot. During that reboot, remove the installation media, and you will have a W23K server that is not SBS. Join it to the existing domain (configure DNS to point at your temp server first), and make it a DC. That will bring all the AD objects over, and then when you move forward with the SBS setup, you will have all your current AD objects in there.
My summary has left out a lot of other little things you'd need/want to do along the way and more that you'd want to do afterward, but my goal has been to give you a possible direction for doing this migration and not having to touch the workstations, except to configure them for Exchange.
For a complete how-to on this process, I highly recommend you go to
and buy the documentation and support for the migration process. It will save you all sorts of time and hassles and you will learn a lot in the process. The documentation is meticulously complete and includes nearly every gotcha you may run into.
Dave Shackelford
Shackelford Consulting