... getting a better picture now ...

And, it seems that your XP was bundled with SP2. That's the best way - for any/all SPs to come.

Because of that, and because it seems that you're stating that everything was working okay after the install of XP and SP2, it would lead me to suspect it is something about having installed subsequent programs before trying to do additional Windows Updates.

Yeah, I'd try the uninstall, particularly of the anti-Spy program, first. It can always be installed later - after you have the Updates you want/need for your machine.