Hi Victor,
Please find my reply below.
1. I am installing the SQL 2005 instance on the same physical box containing SQL 2000 instance. Are there any special precautions i need to take?
Installation of another sql server instance is completly independent activity.
Still you can check for the below.
a) Make sure you have enough space on the drive where you are isntalling sql server 2005.
b) Make sure to choose a different instance name other than SQL server 2000.
2. How do i decomission the SQL 2000 instance on the same box without affecting the 2005 instance?
Again, as SQL server 2005 is a differnet setup, it will not affect sql server 2000 instance. Once sql server 2005 instance is installed, shutdown sql server 2000 services and see if you are still able to access you new sql server 2005 instance and database. I think that will be safer than removing the database
Regards
Sachin