Despite the dire predictions that Windows XP Service Pack 2 (SP2) would wreak havoc on every computer it's installed on, deploying XP SP2 has gone moderately well for me. My overall success rate with the service pack has been fairly high; I've had problems on only 3 of 15 computers, and on 2 of those I was able to get things working right. One computer died completely after the XP SP2 installation; it rebooted constantly and wouldn't even boot in safe mode. Fortunately, I was able to restore the system to its original configuration (XP SP1) without touching the data stored on the computer by using the OEM system recovery tools (from HP). I had to reinstall a few small utility applications to get the computer back up to speed.
This isn't to say that I've had no difficulties with XP SP2. For example, I've had consistent problems using the XP SP2 default firewall configuration with multiple FTP clients. Because all my computers sit behind two other firewalls (one in the router and the other behind the version of Microsoft Internet Security and Acceleration--ISA--Server 2004 I'm currently playing with), I wasn't all that concerned about disabling the XP SP2 firewall. However, I'd have been happier if I could have simply told the firewall to allow standard FTP traffic instead of having to disable it entirely. FTP software vendors tell me that new "SP2-aware" software versions are due out shortly.
Similarly, I've had problems with a number of different Usenet clients (newsreader software), ranging from certain features no longer working on some of the clients to outright failures to connect. These problems aren't firewall related but are instead caused by the changes that SP2 introduces to the core OS. I had an interesting conversation with an ISV's development team, who told me that developers who didn't use Microsoft Foundation Classes (MFC) or the Microsoft .NET framework had more problems making XP SP2-compatible software than developers who used either development platform. As I write this, about 2 weeks after I started talking to vendors about my SP2-related problems, I received new SP2-compatible versions of their software. All of these vendors now post software that's updated for XP SP2 on their Web sites.
In general, the problems I've encountered with SP2 haven't been insurmountable. Nevertheless, I advise you to exercise caution about rolling out XP SP2 to large numbers of users unless you can test the service pack on all the hardware and software configurations you need to support. Furthermore, backing up your computer before installing XP2 SP2 installation is required, not optional. I've already heard from several users whose applications stopped working after they applied post-SP2 hotfixes. One user had to roll back not only the hotfix but the entire SP2 installation to get his applications working again.
Also, although I've had little experience myself with XP SP2 and Microsoft Office, from reader comments I gather that running Microsoft Office Update (http://office.microsoft.com/en-us/officeupdate/default.aspx) before you install XP SP2 is an excellent idea. I haven't heard of any major problems with Office and XP SP2; however, a number of readers have emailed me describing Office behavior before and after the XP SP2 installation that seems traceable to whether or not their Office installations had been updated before XP SP2 was installed.