BSM 2005 will indeed support Reporting Services 2005:
Please follow this official link for Instructions for installing Microsoft Office Business Scorecard Manager 2005 with Microsoft SQL Server 2005
Follow Installing Prerequisite Software step carefully in above link.
Microsoft SQL Server 2005 Reporting Services
Recommended. Provides an instance of SQL Server 2005 for publishing SQL Server Reporting Services report views.
Which version of SQL 2005 is installed
You should use Standard, Developer or Enterprise Edition
Express Versions does only have minor functionality regarding Reporting Services in conjunction with BSM 2005
We hope you find this helpful.
--Microsoft ISV Buddy Team