Upgrading from Exchange 2003 to Exchange 2010 from one DC to another

I have exchange 2003 running on the PDC with Server 2003. It's an older server and I want to demote it and elevate our newer server (A power Edge r510 running Windows Server 2008 R2) to the PDC role and I want to upgrade to Exchange 2010 on the new PDC. While installing 2010 on the new server (lets call it server2) I get the following error:"The forest functional level of the current Active Directory forest is not Windows Server 2003 native or later."I did raise the level on the older server from "multi mode to native mode" as that was what seemed to be the appropriate thing to do and yet I keep getting this error.