Do you want to upgrade the SQL 2005 clustered instance to SQL 2008 R2? I did this a year ago and then I followed this procedure:
1) Create new cluster group and install a new clustered instance with new name.
2) Restore all db's you want to migrate by restore with norecovery.
3) Run sp_help_revlogin and export the users and logins. Import these users and logins on the new servers.
4) Copy all the jobs you want on SQL 2005 on SQL 2008 and disable them.
5) When you are ready to shift from old to new instance - set user databases in read_only - run a diff backup on SQL 2005 and restore them on new SQL 2008 instance.
6) Run SQL 2008 installer and change the Clustered Server name to the same as SQL 2005. You might need to manually delete some DNS entries or uninstall the SQL 2005 clustered server first.
7) Change the port which SQL 2005 run on and use this port on SQL 2008.
I have never tried to run inplace upgrade and I don't know if you can do it.