Service packs are cumulatively. There is never a need to install them in order.
By doing this you will likely bloat the system restore and chew up a lot of disk space.
-> Now let's see what your issue is. Ooops. It's about disk space. Forget SP2 and to reclaim space, turn off then on SYSTEM RESTORE.
Hey, I just recently installed Windows XP Home Edition on my MAC using Boot Camp. I made a sizable partition for it (32gigs). And I got the partition safely and successfully, and the installation was fine. But now I need to update everything, drivers, programs, and even the SP. It came with SP 1, and I downloaded SP2 and SP3 to upgrade gradually. But when I go through the installed for SP2 at the end it gives me an error and says I need '...four addition megabytes to continue. Please free up additional space on your hard disk and retry.' I thought, okay I'll go through now and delete some unnecessary files that I don't need or won't use. And tried again. Same error message. I asked my friend, who told me to check the disk management to see how much free space there actually is. And I have 28.56GB of free space. So, what's wrong here? Why can't I update the service pack?