I would go with a side-by-side install if you are able to do this. You can backup and restore your databases to the new server to reference for your catalog and then you will also need to backup and apply your encryption key. Only major issue I faced was with the conversion of the Dundas items that were being used in SSRS 2005. The custom .NET code that was added to the Dundas items does not convert over and the custom colors for charts did not either since Dundas uses a RGB type value reference.

Other than that it was a very smooth process. You can still publish out your SSRS 2005 reports to 2008 server to if needed.

I would recommend taking a look at this information:

SQL Server 2008 Upgrade Technical Reference Guide - This 490-page document covers the essential phases and steps to upgrade existing instances of SQL Server 2000 and 2005 to SQL Server 2008 by using best practices. These include preparation tasks, upgrade tasks, and post-upgrade tasks. It is intended to be a supplement to SQL Server 2008 Books Online.