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What is the risk involved in running on 91% RAM usage on Windows Server 2003 32 SP2 and SQL Server 2005 in terms of SQL Server performance?

Server has 3GB and mostly sits at around 80% mark with peaks at 91% RAM usage.

Also what are performance prospects for installing SQL Server 2008 R2 on such a system with SiteCore 6.4 CMS?

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There isn't much risk in your scenario. SQL will always take all the memory it can get, and scale back when the OS needs more. You could probably throw another 1GB stick in that box, and get it up to 3.5 usable, just to squeeze a bit more out of it.

Since Server 2008 R2 is 64 bit only, your memory limit is really high, just make sure you are installing SQL 64 bit as well to take advantage of it.

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