Microsoft has characterized Windows XP SP2 as a "critical" must-have update. The company's overriding message is that all Windows XP users should deploy as soon as possible the SP2 collection of security updates and other new features and fixes.

Here is few more helpfull links which i found during my surfing.

Temporarily Disabling Delivery of Windows XP Service Pack 2 Through Windows Update and Automatic Updates http://www.microsoft.com/technet/prodtechnol/winxppro/maintain/sp2aumng.mspx

Toolkit to Temporarily Block Delivery of Windows XP SP2 to a PC Through Automatic Updates and Windows http://www.microsoft.com/downloads/details.aspx?FamilyId=8BCE6BBA-EA5D-4425-89C1-C1CB1CCD463C&displaylang=en

FAQ – Temporarily Blocking Windows XP SP2 delivery through Windows Update and Automatic Updates http://www.microsoft.com/technet/prodtechnol/winxppro/maintain/sp2aumngfaq.mspx

Some programs seem to stop working after you install Windows XP Service Pack 2 http://support.microsoft.com/default.aspx?kbid=842242

Programs that may require you to open ports manually

I installed it few months back on my computer and working fine for me except it stopedd to access my few application like Yahoo,MSN messanger,My Internet connection Manager.

Best of luck.

Thanks and Regards,

Suresh [Microsoft MVP .Net,India ]