This requires two steps:
1- Install the Application Services Database on SQL Server 200, how? you can check m post here:
Install Application Services Database on Microsoft Sql Server 2000
2- You need also to inform all the new features of ASP.NET 2.0, like Profile, Membership, etc ... of the new database to use. I found a good always to use, is to add this into your web.config file:
<connectionStrings>
<!-- Don't change the name of this ConnectionString -->
<remove name="LocalSqlServer"/>
<add name="LocalSqlServer" connectionString="server=..." providerName="System.Data.SqlClient"/>
</connectionStrings>
By default all the new features in ASP.NET 2.0, uses the LocalSqlServer connectionstring name, so since you are overriding it here, no need to configure each provider for each feature.
Hope this helps,
Regards