Unless there is some really pressing reason to do otherwise
(loss of bundled software that I don't have re-install discs for)
I find that when reinstalling an operating system or even simply upgrading from XP-SP2 to XP-SP3 it's often best to start with a clean install by FORMATTING the drive or partition it will be installed on.
I don't like installing XP on a drive where the partition will be shared with data storage.
I typically partition the drive to leave a 25-35gb boot partition and move all the data to a seperate partition (usually designated as E:, because I prefed D: to be the optical drive)
so if you have data move it elsewhere (another physical drive) before starting.
I've never heard of any issue related specifically to SP3 Vs SP2
other than the new parts being written to the drive usually cause greater fragmentation of files than was already present on the drive.
Infact I usually find that sp3 runs better than the earlier version..
basically what I'm saying is, is that the upgrade isn't the problem, but it iwas "the last straw" so to speak of a pre-exsisting condition.... usually lack of system maintainance.
Other than doing "Crash recovery" (my Re-install discs are never out of reach) I find that an awful lot of my personal work load is dealing with customer machines that "are just so slow, I think I need a newer faster machine" and they are usually suprised what I can do with their "old POS computer"
Frankly a newer faster machine will be just as pharked up in just a couple of months, given the typical user's system maintainance neglect.
Do a Disc cleanup (Control panel>Administrative controls>Disc management>(RT Click drive)>Drive properties and push the disc cleanup button.
then Run a registry cleaner (I like "CCleaner") on the problem machine and defrag the drive (I use BOTH "Smart Defrag" and "Defraggler" and see what happens...