Upgrade SQL Server 2005 to SQL Server 2008

Its easier, Run the install for SQL Server 2008 on your server, choose the upgrade option. You'll also want to run the SQL Upgrade Advisor. This tool can help you determine if you're using any deprecated SQL features and will alert you to any gotcha's you might encounter. Once upgraded, to take advantage of many of SQL 2008's new features and enhancements, you'll want to change the compatibility level of your databases from 90 to 100.

Upgrade SQL Server 2005 to SQL Server 2008 (Three easy steps):
1) Update Microsoft .NET Framework to 3.5 SP1
2) Install Hotfix for Windows X64 (KB942288-V4) Windows Installer 4.5
3) Upgrade SQL Server 2005 to SQL Server 2008

SQL 2005 backups on SQL 2008:
You can restore the 2005 backup with 2008 without any problems. The compatibility from this point of view is nice.Backward is not possible only with backup files

Attach/Detach support:
An option which works without too much hassles is manually detaching and attaching the database/log files,Supported.

Support for Data Transformation Services (DTS) in SQL Server 2008 R2:
Supported to some extent, http://msdn.microsoft.com/en-us/library/bb500440.aspx

Dts Conversion to SSIS:
You can start the Package Migration Wizard from three locations.
1) From SQL Server Management Studio. Connect to an instance of the SQL Server Database Engine, right-click the Data Transformation Services node in Object Explorer under Management\Legacy, and select Migration Wizard.
2) From Business Intelligence Development Studio. Create or open an Integration Services Project, right-click on the SSIS Packages node in Solution Explorer, and select Migrate DTS 2000 Package.
3) From the command prompt. Start DTSMigrationWizard.exe from the C:\Program Files\Microsoft SQL Server\100\DTS\Binn folder.