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it will work fine at the 2003 level
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It is also running IIS and has a program installed called AD file transmitter?
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It is also running IIS and has a program installed called AD file transmitter?

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I have a server 2000 on my network that is a member server running an application with SQL database. I want raise the domain functional level to 2003. Will this affect that member server?
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I have a server 2000 on my network that is a member server running an application with SQL database. I want raise the domain functional level to 2003. Will this affect that member server?

Domain dunctional level.

Active Directory (AD) is a Microsoft brand for identity-related capabilities. In the on-premises world, Windows Server AD provides a set of identity capabilities and services, and is hugely popular (88% of Fortune 1000 and 95% of enterprises use AD). This topic includes all things Active Directory including DNS, Group Policy, DFS, troubleshooting, ADFS, and all other topics under the Microsoft AD and identity umbrella.

Active Directory

Windows 2000 is an operating system for use on both client and server computers. It is the successor to Windows NT 4.0, and is the last version of Microsoft Windows to display the "Windows NT" designation. Four editions of Windows 2000 were released (Professional, Server, Advanced Server, and Datacenter Server) that shared a core set of features, including many system utilities such as the Microsoft Management Console. All versions of the operating system support NTFS 3.0, Encrypting File System, as well as basic and dynamic disk storage. The Windows 2000 Server family includes support for Active Directory services, Distributed File System and fault-redundant storage volumes.