I have a 2012 R2 server running Hyper-v is a Physical to virtual conversion supported for server 2003 R2

Yes, you can run Windows Server 2003 R2 with Service Pack 2 (SP2) VM on Hyper-V 2012 R2.

Ref : https://technet.microsoft.com/en-in/library/dn792027.aspx

Yes, Windows Server 2003 and 2003 R2 with SP2 is supported as a guest OS in Hyper-V in Server 2012 R2. As long as the tool you are using can successfully do a P2V then you should be fine.

One thing to check is if the license of the machine you want to virtualize is an OEM one or not. If it is indeed an OEM license then Microsoft say that you will have to obtain another license key once it has been virtualized as the key will be tied to the old hardware.

What tool would I use to do the P2V migration.  I have read that the Hyper-v manager no longer has a p2V tool and that Microsoft Virtual Machine Converter 3.0 does not support conversions from server 2003

There are a number of third party tools out there that can also perform the P2V for you. Hyper-V never had a P2V tool built into it from what I know, all conversions had to be done in SCVMM.

You can try using the free Disk2VHD tool from Microsoft which can be found here: https://technet.microsoft.com/en-us/sysinternals/ee656415

There is a known issue though when you P2V a Windows Server 2003 machine in Hyper-V using Disk2VHD where you'll just experience a black screen with a blinking cursor upon initially booting it. The fix is to repair the MBR boot sector which is outlined in the bottom half of this article: http://blogs.technet.com/b/jonjor/archive/2011/10/04/vm-does-not-boot-following-p2v-or-disk2vhd.aspx

Another option is to use some backup products that allow you to restore the backup to a Virtual Machine in Hyper-V. Unitrends Enterprise Backup, StorageCraft ShadowProtect, Acronis Backup and Recovery for Hyper-V are just a number of products off the top of my head which can do this.

Disk2vhd tool fixed the problem

The Disk2vhd tool fixed the problem