SP2 works fine on both of my computers.
The security center isn't great, but the extra insurance with patches and IE 6 SP1 is good.
If you have a lot of problems, it's best to reformat anyway. No one experiences problems (or so I hear) if they
A) Install SP2 right after installing XP SP1
or
B) Reformat and "slipstream" the files.
Slipstreaming used to not be worth it, but with
AutoStreamer, it is. Great program, just put your Windows CD in one drive and enter the file path to
the full version of SP2. Then, just tell it where to put it and it will make a .iso CD image. You can burn that AS AN CD IMAGE in Nero or Roxio. A lot of other programs do it too...
Sounds complex, but it isn't. The time spent is worth it on a re-install
EDIT: If it won't install SP2 it's probably a problem in Windows, either a Windows file (bad) or an antiquated or incompatible program.