It is... but only to a certain extent. Some things have been altered such as the Weapon structure in that WeaponFire is now an object. Smaller alterations have been done as well. However this change affects mostly the fact whether or not UA decides to use these particular classes. Having worked with Krash in the past, I appears that there is some sort of free exchange of code between USkaarj and UA, which is most beneficial, and due to the rather large extents of differences between RTS to an FPS I would say that since replication is much more important in other areas ... the entire weapon structure was then rebuilt ... but that is just a suspicion anyways.
There were a few tweaks with the engine itself. It is Unreal 2.5 while UT2003 employed Unreal 2.0 ... and as always there are a few small changes to the engine. However, the scripting module of the unreal engine hasn't changed terribly much ... although a few parameters have been added on.
I would say the main reason to switch to UT2004, is simply that anyone who has UT2004 won't have UT2003 installed concurrently, and in light of that most people who bought UT2003 would have bought UT2004. Anyone who is still on UT2003 won't play it any more since the UT2003 community has mainly shifted across. So while developing on UT2003 will benefit those who only have UT2003, the majority of the people won't be reached in that UT2003 mods aren't compatible with UT2004 as a general rule and even more so due to the mod directory support. For a mod the fact that it can be distributed freely, it's one key role is that it must reach the majority of people ... if it doesn't then why make the mod? A mod for a niche group isn't particularly common, although sometimes it pays off immensely ... although I think this is an entirely different point now.
In any case, it isn't so much as the code/engine differences in UT2003 and UT2004 that prevent this cross over, it's more of a political/popularity difference. It usually only takes me a couple of good hours to convert any of my old projects over to UT2004 ... the reason why I switched to UT2004 from UT2003 for any of my future projects was mainly to do with the fact that UT2004 is more popular compared to UT2003.