Many customers have WSS3.0 farms in house and they want to use these farms with TFS. In TFS 2005 you had to use WSS2.0 on TFS machine and you could not leverage the existing farms in the company. With TFS 2008 or Orcas you can use existing WSS3.0 farm. This is well known fact now but I have received many questions about upgrading the TFS 2005 with WSS2.0 environment to TFS 2008 with existing Share Point Farm. Following are detailed steps to achieve this
Detailed instructions
I hope this is helpful. Please let me know if you have any questions or concerns
Please read http://blogs.msdn.com/sudhir/archive/2007/08/03/upgrade-tfs-2005-with-wss2-0-to-tfs-2008-orcas-with-existing-wss3-0-farm.aspx
You can in fact upgrade Team Foundation Server 2005 to use a sharepoint 3.0 server. This can be a good tempory measure to upgrading to TFS 2008 before release. Although if you are just installing in a Development or UAT enviroment you may want to consider 2008...