Lets go over your Plan.
1) Upgrade your VC to 2.5. Depending on where your database is, Local or SAN, I suggest a fresh rebuild so that there are not any carry overs of problems. Make sure that the Update manager works correctly and that the database to that is set up correctly also. Please refer to the Installation guide on page 65. Make sure all your licensing issues are in check. Create your clusters so you can add your new 3.5 host into them.
2) You have the correct Idea going here, I'm guessing that your servers are in a cluster connected to SAN. Set 1 of your hosts into maintenance mode, this will move all VM's off the host, then remove from cluster. Here is YOUR decision wether to Upgrade or Build Fresh, either or it's your choice, but just do it correctly. Once your Host is 3.5, Add it to the 2.5 VC and into the new cluster. What I mean by that is, Your old 3.0.3 host should be in a different cluster than the new host in the new cluster.
3) Add to inventory all your VM's to the new Host. Trust me, this is a better way and it resets the signatures to the VM's correctly to the new host.
4) Once all the VM's are in the new host, rebuild the old host and then add it into the new cluster, make sure to enable your HA and DRS.
5) Upgrade VMTOOLS to all your VM's, this will require you to reboot your VMS so the best timing to this this is when your pulling them from the old host. Shut down the VM's, brouse your datastore with the new 3.5 host and add to inventory. Once its added, thats when you do the install VMTOOLS.
Hope that helped. 