Diagram Objects not available SQL2005

We have two instances of SQL2005 server, one is development, the other is live.
On the live instance, I have no options to create diagrams in management studio. It appears that the permissions are OK. Login and owner are both SA.
Under “Compatability” and “Properties” there is not an option for SQL2005.

On the DEV server, all I did was right click the diagrams folder and I was able to install the diagramming objects. Could this some how impact
the live instance?

Thanks