Hello,
Your other option would be to setup virtual PC within win7.
How
to setup and use Microsoft Virtual PC 2007There is a new version of virtual PC for Win 7 which works really well. I would always recommend to use Virtual PCs for working with local DNN installations, it makes life a lot easier and means it doesn't conflict with your current PC setup, the tutorial link above lists a lot of benefits.
With a Win7 virtual PC, it comes with a licensed install of win XP for free, so you could potentially setup win xp on a virtual machine with SQL Server 2005.
I would recommend this if your live site is 2005 and you are wishing to transfer your local database to your live database.
If however you are just restoring your live 2005 database to a local 2008 database for testing this will work fine - howver you will not then be able to transfer the local 2008 database to your live site.
Thanks,