I haven't heard about the particular problems you're experiencing (except the slowing down from one other person). You should check this thread though to make sure your system meets the requirements and also to see what other conflicts have been discovered:
http://www.daniweb.com/techtalkforums/thread10031.html

If you reinstall XP and then get SP2, you shouldn't have any problems with it.

Necessary? Anything that helps with the security flaws in Windows should be considered a necessity! Having said that, if you have a hardware-type firewall, practice safe browsing habits, and are vigilant about keeping your system pest-free, then you can probably do without it. I don't have it on this computer I'm using now (yet).

MayDay, Service Pack 2 replaces just about all the files that make up a Windows installation. It should really be thought of as an Upgrade rather than as an update.

If your system already has corruption problems (even if you haven't noticed signs of them yet) you're likely to have problems magnified after installing the Service Pack. That is quite possibly what's happened to you. There's also a chance that some older software may cease to work. If that's the case, it's because that software is insecure or badly behaved, and its use should really be discontinued anyway.

Treat the SP like a system Upgrade. Install Windows fresh, install the Service Pack straight afterwards, and enjoy a fresh, clean system.

I've installed it on messy Windows systems and struck problems, I've installed it on a freshly installed system and struck none. And I've also installed it on a longstanding Windows installation which had been throughly cleaned up and was functioning efficiently, and had no problems either

I'll have to agree about starting fresh with XP before applying SP2. I would also recommend a change log; keep track of what you install and if a problem pops up you'll have a better idea of where it came from. Also get familiar with System Restore in XP...when the s___ hits the fan you can always revert back to a known good state, it takes some of the pressure off.