Microsoft recommends to "isolate services", see http://msdn.microsoft.com/en-us/library/ms144228(SQL.90).aspx

I have some experience in running a SQL 2005 instance on a domain controller. The MSSQLSERVER service ran on a domain account. When applying SP2, I had a problem that I described here: http://social.msdn.microsoft.com/Forums/en-US/sqlsetupandupgrade/thread/061b2f31-7cf2-4ff3-a582-6d7d01224156/?prof=required&wa=wsignin1.0.

However I do not think that this happened because the machine was a DC.