sp1 should be definitely be installed...sp2 is more of a judgement call at this point. we still have not rolled out sp2 to the users at work.
for the machines that i set up for people on my own time, i do install SP2 for the sake of 'completeness' (because most of them are not technically savvy), but i prefer to leave what few XP machines i personally run, on sp1. installing sp2 forces you to tweak the system again if you want a really smooth running machine. for example, that stupid auto-update wizard continually pops up once sp2 is installed. the only way to get rid of it is to modify the service settings.
thank god i still run w2k on my production machines. w2k is rock solid and i don't have all these xp-related support issues to deal with.