You cannot use the same sql server because they both have a MSCRM_config database with the same name that holds the configuration for the server.
Also, depending on your family of sql server it might not even be compatible as CRM requires 64 bit.
If you want to upgrade your server and not have both on the same box you might be able to do that if the server meets the requirements. I recommend looking up the requirements and also how to perform the upgrade step by step in the implementation guide.
http://www.microsoft.com/download/en/details.aspx?id=3621
Jamie Miley
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