Seems as though just recently I've had a problem crop up in iCal. When making an all-day, multiple day event I am only given the option of the month to enter the dates, not days.
This is Version 3.0.8 (1287) of iCal, running under OS 10.5.8 on an iMac.
Here a screen capture of the problem:
Weird. I just tried entering an all-day, multi-day event and had no issues. I'm using iCal 4.03 in 10.6.4 though, but it shouldn't be doing what you're seeing in 10.5.8 either.
Something is not right. Have you tried dumping iCal's .plist files, restarting, repairing permissions etc.? It is an Apple app, so repairing permissions might help - I'd start there.