Did Dynamics NAV work with SQL 2005 Clustered environment

Depending on the types of failures you are looking to protect against you might also consider Database Mirroring or Log Shipping. Each of these, along with clustering, provide different areas/levels of fault tolerance. They are sometimes used in combination with each other. Such as using clustering or mirroring to protect against localized failures and log shipping (to a remote site) to provide protection against larger disasters like a building fire.

Clustering only protects against the failure of a duplicated component.

Decide what you are trying to protect and select the best features to meet the requirement. My usual approach is to make a list of the major system components. Next I write down the impact of each component failing. Then I write down how fault tolerance could be provided and the budget. Then you review each and decide which to implement and which you can live without.

Remember, fault tolerance is like buying health insurance. You can't wait till you're sick to go buy some.

Also, don't neglect the rest of the system. You can build a high-end server cluster, but your users will still be down if your cheapo network hub fails.