Can I use SQL Server 2005 as the Biztalk Server 2004 database?

No - SQL 2005 and Biztalk 2004 aren't currently supported together, except with an "arm's length" SQL data adapter.

The primary BTS2004 database still has to be SQL 2000.

References:

915919    Microsoft SQL Server 2005 is not currently supported for Microsoft BizTalk Server 2004 databases
https://support.microsoft.com/default.aspx?scid=kb;EN-US;915919

926628    Summary of operating systems and SQL Server versions supported by different versions of BizTalk Server
https://support.microsoft.com/default.aspx?scid=kb;EN-US;926628