SQL Server 2008 and compatibility level 80
In theory it should work.  You better test it thoroughly before converting production.  If your application uses DTS packages, they will have to be converted to SSIS.  Your OS will have changed as well, so double check to make sure your app does not rely on operating system level functionality.

To further answer your question, the vendor is likely not wanting to support it as a way of covering their butts.  They certified the application to run on SQL 2000, not SQL 2008.  

I would stop giving them money if I were you.