You should be able to use SQL Server 2005 for Designer (I use 2005 Express on my laptop with no issues).
There's a Database Connection page in the installer that asks for a Data Source and a Data Base name to install the Process Manager database. Just change the default (local) Data Source to the name of the off-box server where your SQL Server 2005 is located.
If you just want to connect to another database via generated SQL components, our generators can create components that allow you to specify whatever database string you like to connect to the database.
Hope this helps.