I am developing a web application using ASP .NET 2.0, VS 2008 and SQL Server 2005. I would like to Use SSRS 2005 for the various reports I need to build for this web application
One of the Cons I see with your setup, is you will have to use Visual Studio 2005 for your reporting project since you are using SSRS 2005.
Since it looks like you are using Visual Studio 2008 for your other development, this means having both versions installed and having to have both open and running most the time.
I'm in the same situation and it is a hassle, but one I've gotten used to.
EDIT:
Some of the other Cons I've run across are usually designer related. They may have been fixed in 2008 (don't know for sure), but I attribute them to the infancy of SSRS compared to other more mature reporting solutions.
Datasets changing to Text even though you set them to Stored Procedure every time you enter the data tab
Web Service datasets losing their parameters when changing the query
The expression editor is very dumbed-down. Its slightly better than using notepad.