SQL Server 2000 stores the full-Text index outside the database.  SQL Server 2005 stores the full-text index inside the database.  This means that when a SQL Server 2005 database is restored, the full-text index is also restored, with no rebuilding required.

Actually the Full-Text Catalog is still stored in the file system.  http://msdn2.microsoft.com/en-us/library/ms142541.aspx

There have been several improvements to SQL 2005 FTS, especially performance improvements to the Gatherer.  As mentioned, you can now back up your full-text catalogs with the database in 2005.