Suggested upgrade path recommends upgrading first to the latest DNN 6, and then to the latest DNN 7. At the moment, this means first upgrading to 06.02.07, and then to 07.00.05.
This is just a recommendation, though. If you get upgrade errors, or the site doesn't work as expected, I would try again with the suggested upgrade path.
DNN system requirements have changed substantially between versions 6 and 7. Support for Windows 2003 servers has been dropped, but I doubt IHostASP.NET has used these for a while.