No, you don't need 2003 licenses. The licensing requirements depend on the OS running on the Terminal Server, not the OS of the TS Licensing Server. So as long as your TS runs W2K, W2K TS CALs is all you need.

You don't write what the OS of your clients is. I'm going to assume that they run W2K Pro or XP Pro, and thus are entitled to a free, built-in "Existing Windows 2000 TS CAL". This free pool of TS CALs is also available on a SBS 2003 server, once you install the TS Licensing Services on it. So as soon as your TS detects the new LS, there's shouldn't be any problem, neither for existing or new clients.

The only problem which *might* occur is with existing clients. Sometimes, a TS has problems with client licenses which are issued by another LS than the current LS. If that happens, you can simply delete the locally stored license from the client, forcing it to grab a new one. But this happens very seldom, so no need to do it in advance on all clients.