First, don't ask me why. :( There was a need from vendor. Let's just leave it at that.
So run through your normal SQL 2005 install, the validation page throws up a warning "IIS not running". Since SSRS is a must on this machine, so let's Google Bing it. Following some results like this one: http://www.iis.net/learn/install/installing-iis-7/installing-iis-7-and-above-on-windows-server-2008-or-windows-server-2008-r2, run SQL 2005 install wizard again and got the same message. What the? Double check and everything works according to the blog.
After a short walk, I realized that "why would SQL 2005 know about IIS 7?" Now the focus is on searching to install IIS 6 on a Windows 2008 box. The trick was that "web server role" was needed for IIS 7, but IIS 6 requires an application server role install.
References here:
http://technet.microsoft.com/en-us/library/cc754024(v=ws.10).aspx
https://www.microsoft.com/technet/prodtechnol/WindowsServer2003/Library/IIS/750d3137-462c-491d-b6c7-5f370d7f26cd.mspx?mfr=true