Is it a problem to have both of these installed on the same Windows instance? I.e. will one break the other or impact it negatively in any way?
Some SQL Server components cannot exist side-by-side, like the SQL Server Browser Service. This must be the newer version, but should be backwards compatible with old versions of SQL Server.
In practice, I've never seen this be any more than a consideration, it's never manifested into a problem.
There's a comprehensive answer on MSDN.
Things to note:
Other than that yes, I’ve seen 2005 and 2008 work happily on the same server, and it seems the same is true for 2012