>>The version the backup is from is SQL2008 R2. The server you tried to restore to is NOT R2. They do not play nice in backup/restore.
>>
>>Either upgrade the 2008 server to R2 or copy the database from the server you did restore the backup to.
>
>1) Is there an 'upgrade' or are we talking a full install?
>2) Will I still be able to access all the other DB's currently in 2008?

Yes, if you have, say, standard version of SQL 2008, you can upgrade it to SQL 2008 R2 Standard.

I remember I had SQL 2008 Express edition and I was able to upgrade it to SQL 2008 R2 developer's.