When upgrading enterprise servers involved in replication, you must upgrade the Distributor before upgrading any other servers. Microsoft® SQL Server™ version 7.0 replication is designed to support existing SQL Server 6.5 Publishers and Subscribers automatically, in addition to SQL Server 7.0 replication servers. You can phase in the conversion of the servers in your replication topology by upgrading the Distributor first and then upgrading other servers as time and resources permit.
Note You cannot use all of the new replication features until you have upgraded all of the servers involved in your replication topology.
Replicating Between Different Versions of SQL Server