you're specifying two different issues:
first you said the error in your post is due to trying to connect to a Report Server catalog, not a DB for datasource of a report.
but you're asking if RB 3.0 can work with versions of SQL Server prior to 2008 R2.
The answer to the latter is yes, it can. RB 3.0 connects to a variety of data providers including SQL Server 2000, 2005, and 2008 (via the SQL Native Client), as well as Oracle, ODBC, OleDB, ADOMD (Analysis Services), Teradata, SAP BI, Essbase, XML, etc...
The former seems to be URL connectivity to the Report Server for a 2008 server. I know for a fact that if you use BIDS 2008 R2, instead of RB3, the deployment options for the report project provides a property "TargetServerVersion" to allow you to choose the version of the target server (2008 or R2, but not earlier). If you try to deploy an R2 report to a 2008 server using BIDS and the report has new features, BIDS will complain since it cannot "down-convert".
However, I am not sure that RB 3.0 can actually connect to a report server earlier than R2, like BIDS can. That would explain why you're getting connectivity issues.
HTH
Thiago