How to: Configure a Report Server Database on a Database Engine Upgraded from SQL Server 7.0 (Reporting Services Configuration)
Before creating a report server database on a SQL Server Database Engine instance that has been upgraded from SQL Server 7.0, you must run a stored procedure to set the compatibility level. Setting the compatibility is necessary to avoid the following exception: "Incorrect syntax near 'COLLATE'. You may need to set the compatibility level of the current database to a higher value to enable this feature."
This error occurs when you try to create a report server database on a SQL Server instance that has been upgraded from version 7.0.
To set the compatibility level on an upgraded database
Run exec sp_dbcmptlevel on the master database. For more information, see sp_dbcmptlevel (Transact-SQL).
Start the Reporting Services Configuration tool and connect to the report server instance you want to configure.
In Database setup, connect to the SQL Server Database Engine instance for which you ran the stored procedure.
Click New to create the database.
Specify the database name and the account used to create the database, and then click OK.
Specify credentials for the report server database connection. For more information, see Configuring a Report Server Database Connection.