Rumors of huge performance increases as a result of installing XP Service Pack 3 are, well, exaggerated.
Over on ZDNet I compared four flavors of XP (XP RTM, XP SP2, XP SP2 and all patches to date and XP SP3) on two different hardware platforms (a high-end system and an old Pentium III system).
The bottom line:
I could try to bring significance to the small variations in some of the times and scores that we’ve seen above, but to be honest there’s only one real conclusion to come to - performance variations seen after applying service packs is small. Sometimes there are small gains (notice how compressing files becomes faster with each application) while other times there are performance losses (check out file copy - 2 on the Phenom system). Overall, the losses and gains seen are not significant.
If you're looking to speed up an XP install then SP3 isn't the answer. Instead, consider upgrading drivers (especially graphics card drivers), uninstalling unwanted apps, changing your security software (just as a test, uninstall your antivirus and see how much faster your system is ... ) or do a complete clean sweep and reinstall Windows.