You said you were trying to install ALM on a new Windows server with SQL 2008 as the database backend. Where is that SQL 2008 software installed?
You said you want to create your new site admin schema by upgrading your previous schema, which was in SQL 2003.
In order for your new ALM installation to upgrade an existing schema, the schema has to exist on the database server you have specified in your installation. Did you take a copy of the site admin schema from the SQL 2003 system and restore it onto the SQL 2008 system? You will need to do that.
Do you plan to migrate all your projects from the SQL 2003 system to the SQL 2008 system also? If not, then when you upgrade the copy of the Site Admin schema it will contain information about your Domains and Projects that won't be valid. Idealy you should "remove" (not delete) the projects from the Site Admin schema before you copy that schema to the SQL 2008 system. However, if you want to continue to use the projects on the QC 10 environment you then will have to "restore" all those projects back into the original Site Admin schema.
You said you want to create your new site admin schema by upgrading your previous schema, which was in SQL 2003.
In order for your new ALM installation to upgrade an existing schema, the schema has to exist on the database server you have specified in your installation. Did you take a copy of the site admin schema from the SQL 2003 system and restore it onto the SQL 2008 system? You will need to do that.
Do you plan to migrate all your projects from the SQL 2003 system to the SQL 2008 system also? If not, then when you upgrade the copy of the Site Admin schema it will contain information about your Domains and Projects that won't be valid. Idealy you should "remove" (not delete) the projects from the Site Admin schema before you copy that schema to the SQL 2008 system. However, if you want to continue to use the projects on the QC 10 environment you then will have to "restore" all those projects back into the original Site Admin schema.