I ran into several problems with XP..
I'm not much of an XP fan when it comes to automation.
I did as you did. Removed (manually) the latest hotfix from MS. AND TURNED OFF the automatic upgrades. I haven't installed SP2, yet... I will probably experiment with that on another machine. BTW, the automatic recovery feature on XP does not work. .. or did not work on my machine..
I will post my experience with XP & SP2. Unless someone beats me to it with good news ;o)
BTW, I was running LV7.
JLV