By "what level of AD," I meant are your DC's running Server 2003, or Server 2000? This is important because if your DC's are still Server 2000, you will need to do ADPREP /forestprep and /domainprep on your schema master before you attempt the exchange upgrade.
In place upgrade should be OK, as long as the present E2K servers aren't light on RAM, HDD, or CPU. The process would be, a) make sure you're on the latest Server 2000 and Exchange 2000 SP, b) in-place upgrade the O/S to Server 2003, c) in-place upgrade Exchange 2003, d) service pack Exchange 2003 and Server 2003.
I didn't suggest in-place upgrade simply because I never do; I just think that migrating onto a new box is cleaner -- It lets you space out the migration over a couple of days with failback points along the way, forces you to touch all the little nooks and crannies of Exchange and re-home/verify your exchange config (system folders, connectors, RUS, etc.), and is LESS RISKY -- and so I just don't think to suggest in-place.