Its best to install SP2 with a fresh installation of Windows. If you do this, not only will SP2 run smoothly, but your Windows will be better, more stable, and more secure than it would be with only SP1. However, problems can arrise by installing SP2 on a worn-down installation of XP. Think of it like upgrading an older version of Windows to a newer version without a clean install. You always get better results from the clean install.