VSS has made improvements with the release of VSS 2005, and later several fixes to make it compatible with VS2008, however the gold standard for Visual Studio 2005 and 2008 is Team Foundation Server. MS brands Team Foundation Server ( TFS ), as the server backend to Visual Studio's suite of products.
The down side is it can get a bit pricy. I personally have never used SVN, but if it has a direct integration with Visual Studio, ( I don’t want to have to go outside my IDE to check in/out a file EVER ), then it’s as good as any source control system.
TFS is Much more than source control though, as it has bug tracking, reporting, source control, collaboration tools ( through SharePoint ), and automated builds, ( to name a few ).