Adding SBS2003 to a SBS2000 domain trouble - server 2000 almost unusuable

Installing SBS2003 Server into a SBS2000 domain hangs my SBS2000 Server so that barely anything works on it.

RDP lets me logon to the server but I never get a desktop just a blank blue screen as if it's loading forever. Doing a \\server brings up all file shares and printers without problems. Doing a "remote manage" of the server works somewhat. However Exchange barely works anymore!

The new SBS2003 seems fine. Most stuff runs good except "Continue Setup" <-- sbs install wizard hangs at like step 37 of 40 and usually ends up hanging the entire system (forced remote reboot with shutdown -i). I have made the NEW server the operations master and I have also give it back to the SBS2000 server a few times to see if that would make a difference.. it doesnt seem to.

This needs to work by morning PST :(

DCDIAG OUTPUT on SBS2003 Server (new server):

D:\Program Files\Support Tools>dcdiag

Domain Controller Diagnosis

Performing initial setup:
   Done gathering initial info.

Doing initial required tests

   Testing server: Default-First-Site-Name\NEW_SBS2003_SERVER
      Starting test: Connectivity
         ......................... NEW_SBS2003_SERVER passed test Connectivity

Doing primary tests

   Testing server: Default-First-Site-Name\NEW_SBS2003_SERVER
      Starting test: Replications
         ......................... NEW_SBS2003_SERVER passed test Replications
      Starting test: NCSecDesc
         ......................... NEW_SBS2003_SERVER passed test NCSecDesc
      Starting test: NetLogons
         ......................... NEW_SBS2003_SERVER passed test NetLogons
      Starting test: Advertising
         ......................... NEW_SBS2003_SERVER passed test Advertising
      Starting test: KnowsOfRoleHolders
         ......................... NEW_SBS2003_SERVER passed test KnowsOfRoleHolders
      Starting test: RidManager
         ......................... NEW_SBS2003_SERVER passed test RidManager
      Starting test: MachineAccount
         ......................... NEW_SBS2003_SERVER passed test MachineAccount
      Starting test: Services
         ......................... NEW_SBS2003_SERVER passed test Services
      Starting test: ObjectsReplicated
         ......................... NEW_SBS2003_SERVER passed test ObjectsReplicated
      Starting test: frssysvol
         ......................... NEW_SBS2003_SERVER passed test frssysvol
      Starting test: frsevent
         ......................... NEW_SBS2003_SERVER passed test frsevent
      Starting test: kccevent
         ......................... NEW_SBS2003_SERVER passed test kccevent
      Starting test: systemlog
         ......................... NEW_SBS2003_SERVER passed test systemlog
      Starting test: VerifyReferences
         ......................... NEW_SBS2003_SERVER passed test VerifyReferences

   Running partition tests on : Schema
      Starting test: CrossRefValidation
         ......................... Schema passed test CrossRefValidation
      Starting test: CheckSDRefDom
         ......................... Schema passed test CheckSDRefDom

   Running partition tests on : Configuration
      Starting test: CrossRefValidation
         ......................... Configuration passed test CrossRefValidation
      Starting test: CheckSDRefDom
         ......................... Configuration passed test CheckSDRefDom

   Running partition tests on : mydomain
      Starting test: CrossRefValidation
         ......................... mydomain passed test CrossRefValidation
      Starting test: CheckSDRefDom
         ......................... mydomain passed test CheckSDRefDom

   Running enterprise tests on : mydomain.local
      Starting test: Intersite
         ......................... mydomain.local passed test Intersite
      Starting test: FsmoCheck
         ......................... mydomain.local passed test FsmoCheck

D:\Program Files\Support Tools>



Output from NetDiag on new SBS2003 Server:

D:\Program Files\Support Tools>netdiag

.....................................

    Computer Name: new_sbs2003_server
    DNS Host Name: new_sbs2003_server.mydomain.local
    System info : Microsoft Windows Server 2003 (Build 3790)
    Processor : x86 Family 15 Model 4 Stepping 1, GenuineIntel
    List of installed hotfixes :
        KB924667-v2
        KB925398_WMP64
        KB925902
        KB926122
        KB927891
        KB929123
        KB930178
        KB932168
        KB933714
        KB933729
        KB933854
        KB935839
        KB935840
        KB936021
        KB936357
        KB936782
        KB938127
        KB938127-IE7
        KB938464
        KB941569
        KB942830
        KB942831
        KB943055
        KB943460
        KB943485
        KB944338-v2
        KB944653
        KB945553
        KB946026
        KB948496
        KB948590
        KB949014
        KB950762
        KB950974
        KB951066
        KB951072-v2
        KB951698
        KB951748
        KB952954
        KB954211
        KB956390
        KB956390-IE7
        KB956391
        KB956803
        KB956841
        KB957095
        KB958644
        Q147222


Netcard queries test . . . . . . . : Passed



Per interface results:

    Adapter : Local Area Connection 2

        Netcard queries test . . . : Passed

        Host Name. . . . . . . . . : new_sbs2003_server
        IP Address . . . . . . . . : 10.1.1.202
        Subnet Mask. . . . . . . . : 255.255.255.0
        Default Gateway. . . . . . : 10.1.1.1
        Dns Servers. . . . . . . . : 10.1.1.202
                                     10.1.1.200


        AutoConfiguration results. . . . . . : Passed

        Default gateway test . . . : Passed

        NetBT name test. . . . . . : Passed
        [WARNING] At least one of the <00> 'WorkStation Service', <03> 'Messenge
r Service', <20> 'WINS' names is missing.

        WINS service test. . . . . : Skipped
            There are no WINS servers configured for this interface.


Global results:


Domain membership test . . . . . . : Passed


NetBT transports test. . . . . . . : Passed
    List of NetBt transports currently configured:
        NetBT_Tcpip_{A49D168D-E40C-4C8F-B367-7DB1193F4B5B}
    1 NetBt transport currently configured.


Autonet address test . . . . . . . : Passed


IP loopback ping test. . . . . . . : Passed


Default gateway test . . . . . . . : Passed


NetBT name test. . . . . . . . . . : Passed
    [WARNING] You don't have a single interface with the <00> 'WorkStation Servi
ce', <03> 'Messenger Service', <20> 'WINS' names defined.


Winsock test . . . . . . . . . . . : Passed


DNS test . . . . . . . . . . . . . : Passed
       [WARNING] The DNS entries for this DC cannot be verified right now on DNS
 server 10.1.1.202, ERROR_TIMEOUT.
    PASS - All the DNS entries for DC are registered on DNS server '10.1.1.200'
and other DCs also have some of the names registered.


Redir and Browser test . . . . . . : Passed
    List of NetBt transports currently bound to the Redir
        NetBT_Tcpip_{A49D168D-E40C-4C8F-B367-7DB1193F4B5B}
    The redir is bound to 1 NetBt transport.

    List of NetBt transports currently bound to the browser
        NetBT_Tcpip_{A49D168D-E40C-4C8F-B367-7DB1193F4B5B}
    The browser is bound to 1 NetBt transport.


DC discovery test. . . . . . . . . : Passed


DC list test . . . . . . . . . . . : Passed


Trust relationship test. . . . . . : Skipped


Kerberos test. . . . . . . . . . . : Passed


LDAP test. . . . . . . . . . . . . : Passed


Bindings test. . . . . . . . . . . : Passed


WAN configuration test . . . . . . : Skipped
    No active remote access connections.


Modem diagnostics test . . . . . . : Passed

IP Security test . . . . . . . . . : Skipped

    Note: run "netsh ipsec dynamic show /?" for more detailed information


The command completed successfully

D:\Program Files\Support Tools>

Replmon worked perfectly on the new SBS2003 Server.

NSLOOKUP reports this on the new SBS2003 Server:
D:\Program Files\Support Tools>replmon

D:\Program Files\Support Tools>nslookup
*** Can't find server name for address 10.1.1.202: No response from server
Default Server:  UnKnown
Address:  10.1.1.202<--- this is the new sbs2003 servers IP

HELP!