[niteriderxp]

Not using SSL for ActivSync means you are sending everything over the internet unencrypted.
In our company that would get us in hot water very quickly.

When we had Exchange 2003, we had forms authentication and SSL enabled.
Have you tried enabling SSL?

Exchange 2007/2010 Client Access Server will not proxy email for an Exchange 2003 server.
In a 2003/2007/2010 coexistence environment they can only route email between each other.

Here is the recommended upgrade path to Exchange 2007/2010:
1. Install a new Exchange 2007/2010 server into the existing Exchange organization.
2. Configure the new Exchange 2007/2010 server:
a. Enable legacy client support during install (Outlook 2003 support)
b. Configure the server for OWA, SMTP, and ActiveSync accessibility with proper certificate
c. Replicate public folders over to the new server
d. Setup Offline Address Book
3. Migrate legacy mailboxes over to the new server
4. Point clients to the new server if they don't update automatically
5. Uninstall Exchange 2003 from the old server

This is by no means a complete list and an Exchange upgrade is not a five second task.
You should read up on how to do this correctly and properly plan for it.
There is no way to do an in-place upgrade so you will need new hardware, a Windows 2008 R2 license, an Exchange 2010 license, and Client Access Licenses for both Windows 2008 R2 and Exchange 2010.