1.) Terminate any unnecessary programs.

2.) Unplug any unnecessary hardware, such as printers, scanners, etc.

3.) Make sure you run the scans...your antivirus, Ewido, etc.

4.) Corrupt or otherwise modified system files can cause the upgrade operation to fail and enter a continuous reboot cycle. If this is a retail version of XP perform a repair installation of Windows; If it is an OEM Recovery System then run a non-destructive recovery.

5.) Make sure your system has the latest updates from Windows Update.

6.) Click here to download a misc. update from Microsoft that fixes one such cause of this problem.

Once the above has been completed try installing SP2 again.

Hope this helps,
John