Because ESX 2.5 uses VMFS2 and the guests need hardware and tools updates for ESX 3.x, there is no way to upgrade from 2.5 to 3.5 without down time.  You can minimize downtime using DMotion, which is a live migration / 2.5.x to 3.x upgrade feature that includes storage VMotion, but that still requires the guest to be shut down to upgrade virtual hardware, followed by another reboot to upgrade the VM tools.  If you are upgrading a lot of guests, there's a command line utility available to do more than one hardware / VM tools upgrade at once.