|No issues that I am aware of, you just miss out on the extra functionality.|
*Note: Any existing Windows 2000–based or Windows Server 2003–based Domain Controllers in the environment will no longer function, and in fact, the upgrading wizard will not allow you to continue with the operation. Before raising functional levels to take advantage of advanced Windows Server 2008 features, ensure that you will never need to install domain controllers running Windows 2000-based or Windows Server 2003–based Domain Controllers in your environment.
Supported Domain controllers – Windows Server 2008.
Features and benefits include all default Active Directory features, all features from the Windows Server 2003 domain functional level, plus:
* Fine-grained password policies – Allows multiple password polices to be applied to different users in the same domain.
* Read-Only Domain Controllers – Allows implementation of domain controllers that only host read-only copy of NTDS database.
* Advanced Encryption Services – (AES 128 and 256) support for the Kerberos protocol.
* Granular auditing – Allows history of object changes in Active Directory.
* Distributed File System Replication (DFSR) – Allows SYSVOL to replicate using DFSR instead of older File Replication Service (FRS). It provides more robust and detailed replication of SYSVOL contents.
* Last Interactive Logon Information – Displays the time of the last successful interactive logon for a user, from what workstation, and the number of failed logon attempts since the last logon.
Hope this answers you question.