Nothing in Outlook is forwards or backwards compatible. It's stupid. My suggestion, remove 2k3, install XP, and then install 2k3 over it. It may pick up that you have older pst files, and convert them for you.

I had the same problem when I switched to Linux. I downloaded a small little library called libpst, but, unfortunately it could only do formats 97 through 2000.

You never know, perhaps in 2k3, there is an import function which allows importing of older psts, but based on my experience, nothing is compatible with other versions.