It was developed on SQL Server 2005, though it should work on 2008. Have you tried running it on a different database? Also, sometimes when you copy scripts from SQLServerCentral.com it also copies "funky" (and sometimes "invisible") characters with the code. It's happened to me and I've needed to reformat the code before it would run. Hope this helps.
Isn't Northwind SQL 2000? You need at least 2005 for the code to work as ROW_NUMBER is not recognized in 2000 nor is CTE.