You have SQL Server 2005 running and your needs have changed. Your new product needs SQL Server 2008. You have two options
1. Create a new instance of SQL Server 2008
2. Upgrade your existing SQL 2005 instance to 2008
If you have a number of databases running, it would be prudent to just upgrade the instance. If SQL 2008 is required, SQL 2005 will not work. But SQL 2005 instance does work with SQL 2008 SQL Server Management Studio. By the way SQL Server 2008 is way better than 2005.
So we are now going to upgrade our SQL Server 2005 Instance. Here are the steps you need to follow.
Step 1. Navigate to Server 2008 R2 Installation Center
Go to start ->All Programs -> Microsoft SQL Server 2008 R2 -> Configuration Tools -> SQL Server Installation Center