Migration from Windows server 2003 to 2012 R2

Make sure you are using the version of adprep from 2008 R2. It should be run on the schema master and infrastructure master for the domain for /forestprep and /domainprep respectively. Win2008 R2 is 64bit, but it also has a 32bit version of adprep if you need it. (ADPREP32) Yes, it can be run during business hours, and I have never seen them take more than a few seconds to do their jobs.

1. Run adprep /forestprep. Wait for schema changes to replicate.
2. Run adprep /domainprep. Wait for replication.
3. Don't mess with domain and forest functional levels yet.
4. DCPROMO your Win2008R2 box alongside your existing DCs.
5. Transfer FSMO roles to it if you wish.
6. Begin decomissioning your old DCs by first demoting them with DCPROMO.
7. You're done. Your domain and forest functional levels are still at 2003, you simply have a 2008 R2 machine for a domain controller. (You didn't specify exactly what your DFL and FFL was so I assumed.)

Answering your questions:

1. You need to transfer the roles manually as per my instructions above, that is, if your intent is to let the new 2008R2 DC have the FSMOs.

2. Yes, DCPROMO should be all that is required to demote a domain controller. If something goes wrong trying to demote it though you'll have to perform a metadata cleanup. (Not hard.)

3. After all of your old DCs are gone and you have only 2008R2 DCs in your forest, you can start thinking about raising the FFL and DFL.

This is the typical path when upgrading domain controllers in the domain. Contrary to my previous claim in the comment, there is an in-place upgrade path from Windows Server 2008 (R2). The procedure is quite similar to introducing a 2008 DC into a 2003 domain, the best place to start is the Technet documentation. Check the prerequisites (forest functional level, recommended hotfix when running under Hyper-V) and follow the walk-throughs from the official documentation or third parties.

• http://greigmitchell.co.uk/guide-migrating-server-2008-r2-domain-controllers-to-server-2012/
• http://kpytko.wordpress.com/2012/09/07/adding-first-windows-server-2012-domain-controller-within-windows-200320082008r2-network/

Transferring FSMO levels is just the same as has been before - just use ntdsutil from either DC.