Windows XP SP3 was released on 2008-05-06 and has shown no serious, widespread problems so far. You are encouraged to install it.

Background information on Windows XP Service Pack 3

Once you have installed and tested it thouroughly for a couple of days, you can uninstall all prior software patches with the UninstallRemover tool or manually.

For general information and problem solving of Windows service pack installations please see the Windows XP Service Pack 2/3 Problem Solver.

More questions? Read: Should I Bother Installing Windows XP Service Pack 3?