The llblgen pro compatibility level for sqlserver is used for paging query generation and also for NEWSEQUENTIALID() usage, TOP (parameter) instead of TOP value. The compatibility level 80 in sqlserver is used for the table structure etc. if I'm not mistaken, it doesn't limit sqlserver 2005/2008 features, it's just more flexible when executing sqlserver 2000 code.
http://blogs.msdn.com/sqlserverstorageengine/archive/2007/04/26/what-s-the-difference-between-database-version-and-database-compatibility-level.aspx
I find it a bit confusing myself as well, I think what MS wants to explain is that if you define a database to compatibility level 80, code which ran on sqlserver2000 will work.
Our DQE doesn't do that much fancy stuff with sqlserver specific features other than the paging, newsequentialid() and TOP (param) stuff. Setting our compatibility level to 2005 for a sqlserver 2000 database will fail in some situations (paging, guid pk fields without a value set, and limited queries as they use a TOP (param) construct), using the 2000 compatibility level on a 2005/2008 database will work, as it will just omit using sqlserver 2005+ features and will use temptables for paging, not support MAX types, will use TOP n instead of TOP (@param)