Version 2 of SharePoint did not support customizing the navigation.  In Version 3, you have a few options for configuring the navigation:

In the site settings, you can configure the Top Link Bar:

The Top Link Bar page allows you to manage the inheritance and add additional links to the top navigation bar:

Also under site settings, you can configure the Quick Launch:

The Quick Launch page allows you create headings and links and change the order of the links/headings:

You also have the option to remove the Quick Launch all together, though it is a little tough to find.  Back on the site settings page, click on the Tree View link:

The Tree View page allows you to disable the Quick Launch and also enable a Tree View navigation control:

The Tree View looks like this when enabled: