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Raise functional level - 2000 native and migration to 2008R2

Need basic info - for migration of 2003R2 domain with 5 DC's and domain functional level - 2000 native...

I have 2 sites.. with very old servers... (one is actually P3! and 2 other are VM)
Site 1 - 3 DC's ( one of them holds all FSMO rules)
Site 2 - 2 DCs' (FSMO rules at the first site)

First I moved all FSMO rules to VM DC..
all 5 Dc's are the same  - Windows 2003R2 and domain functional level - 2000 native

I want to upgrade the domain to 2008/2012/2016...

As I understand, first stage is to Raise functional level - to 2003 -

Is there any checking I need to do before I just choose to raise the functional level? I mean - Is the log must be clean from errors or something - is it possible that somehow I will have any problem ? or if something is wrong than the level wont change and nothing happen?

I do not have any exchange... and the network is really basic .. I have a really old netapp.. but I dont think its matter..?

Stage 2 - what is the best ? I read many posts but it not exactly my case...
If I cant raise the level - whats best to do?

If I raised the level - is it better to add a 2008r2 server and move all FSMO rules to it? all the other 5 DC's will be OK?
Can I move FSMO to the new 2008R2 and than remove 1 old DC and join a new 2008R2 instead? and so on for each old DC? and than go to 2012/2016/2019?
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If you have ant XP machines, transition them to Win 8 or 10
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Thanks Mahesh!
Regarding - simply raise domain and forest functional level - it's the same operation right? - Im not taking any risks with that ?
Is it that simple  just to click?
Is it better to upgrade to 2012/2008 first instead of 2016? - Assuming I have lab enviroment with some XP's and cant upgrade at this stage...

Thanks again!
XP should not be the criteria for decision, it can get issues any time and you won't get any support
Infact windows 7 even will loss support in Jan 2020

hence better update it to 2016 directly and discard XP machines ASAP
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Just want to add - all new DC's will be VM in new hardware...
that's shouldn't be issue
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Will try it soon!
one correction in accepted answer, refer last line:

once all 2003 dcs are demoted, raise DFL and FFL to 2008 R2 or 2012 R2 ad and then migrate FRS Sysvol to DFSR Sysvol as 2008 is minimum functional level required in order to migrate FRS Sysvol to DFSR Sysvol