in-place upgrade would be easier... because the process is basically a matter of sticking the SQL disc in and running through the upgrade wizard. no changes to sharepoint needed. i'd take a complete backup of the farm beforehand... and probably lock the farm so it's read only during the process.
if you want to move to a new SQL server, you'll likely not be able to move the config db's. they just don't transfer well. this process would not be any different from moving sharepoint databases from one server to the next. sharepoint doesn't really care about the version of sql (as long as it's a newer version of sql)... it just needs to know where the server is. so in this case, you'd have some configuration in sharepoint to disassociate it from the old server and associate it with the new server. you'd likely need to re-do your configurations/settings as well because the config db's usually can't be moved. so, you'd disassociate sharepoint from the current server, detach the sql content db's, move those to the new server and attach. sql will handle the upgrade from 2005 to 2008 when you attach the db's. then point sharepoint to the new db server and configure sharepoint to use the content db's you moved. this is do-able ... but not as quick & easy as the in-place.
