Ok so here's our setup:
We have 2 Windows 2003 Domain Controllers. I am trying to replace them with Windows 2008 R2.

The 2003 servers are named DC01 and DC02. The 2008 R2 servers are DC1 and DC2.

I prepared the Windows Server 2003 Forest Schema for a Domain Controller that runs Windows Server 2008 or Windows Server 2008 R2. Then with both of the new servers up as member servers I ran dcpromo on DC1 using the advanced option and added it successfully to my existing domain. It's roles are GC, DNS and Active Directory Domain Services. I transferred The PDC Emulator, RID Pool Manager, and Infrastructure Master roles to DC1. The Schema Master and Domain Naming master are still on DC01.

The first issue that I'm encountering is when I dcpromo the DC2 and select "Replicate data over the network from and existing domain controller" I select that I want to replicate from DC1 and I get the following error:

Failed to identify the requested replica partner (dc1.xxx.org) as a valid domain controller with a machine account for (DC2$). This is likely due to either the machine account not being replicated to this domain controller because of replication latency or the domain controller not advertising the Active Directory Domain Services. Please consider retrying the operation with \dc01.xxx.org as the replica partner. "The server is unwilling to process the request.

Is this because the Schema Master and Domain Naming Master roles are still on the old DC01? And if so, if I transfer Schema Master and Domain Naming Master roles to DC1 what is the risk or breaking my AD? I'm a little paranoid because this process HAS to be transparent. ANY down time or interruption will result in me getting a verbal ass kicking from my I.T. Director.

Both of the new servers DNS point the the old DNS servers (DC01 and DC02) not themselves by the way.