I was adding a shiny new domain controller to my server farm earlier today, we have just two Windows 2000 SP4 domain controllers on old kit and they are due to retire. With the hardware selected, purchased and a fresh copy of Windows Server 2003 R2 installed, I set to installing Active Directory. DCPromo.exe fires up and I go through the configuration steps until...

"The Active Directory Installation Wizard cannot continue because the forest is not prepared for installing Windows Server 2003. Use the Adprep command-line tool to prepare both the forest and the domain. For more information about using the Adprep, see Active Directory Help.

The version of the Active Directory schema of the source forest is not compatible with the version of Active Directory on this computer."

A quick rootle around TechNet shows a simple solution on KB917385 - on your Schema Master (normally your first DC in the domain, unless you've changed it) pop in the second CD of your R2 install and run:

[CD]:\CMPNENTS\R2\ADPREP\Adprep.exe /forestprep

That's as far as the knowledgebase article takes you, which does resolve that specific error, but not the next one you're likely to encounter, especially if you've got more than one DC, and/or more than one domain. For each DC in your domain you will also need to run:

[CD]:\CMPNENTS\R2\ADPREP\Adprep.exe /domainprep /gpprep

Now back on your new R2 server you can fire up DCPromo.exe and install Active Directory as per normal. Daniel Petri has an excellent article on how to install and test your new domain controller that you can follow, I've installed countless domain controllers and I still refer back to that article.