I have an '05, that I've had for 5 years now (as of August). It has over 22k on the odo now. I would not hesitate to ride it to California, and back.
Except for replacing the cam chain tensioners with the TOC brand replacements, the rest of the bike is holding up fine. I'm the second owner; the guy who bought it new put a little over 1,500 miles on it, then sold it on ebay to me, due to back problems (he was obviously getting out of motorcycling all together).
Without knowing what your bike's specific mechanical problems are, and how much they will be costing you, I can't give you more specific advice. I'd also need to know what the dealer is asking for the '05 (and what is the minimun he/she would really take...
Have you test-rode the newer '05 yet? If not, can you? If you have, did it start and idle smooth? Did it shift and run like a VN750 in good tune--or did she apparently "need some more work"?
Otherwise, we don't know for sure if the '05 you're looking at has a totally clean bill of health, either. So...to answer your questions....I need still more info from you!
Past that, your '97 and my '05 have the same motor, tranny, and everything else....to 99% the same. The only real difference is mainly the paint job.
Is your current VN750 bike a "California" bike? If it is, that might be justification enough to get rid of it, assuming your other mech issues are bad enough, too.