If the PC already has a firewall, and all XP critical updates, and
anti-spyware software, and of course anti-virus software, you can probably
live without SP2, at least for a while. (By the way, whether you install
SP-2 or not, be sure to install a third-party firewall, which blocks both
incomming and outgoing communications; the XP firewall only blocks incomming
stuff. There are several good firewalls out there; Zone Alarm 5.5 is free
and compatible with SP-2.)
However, it is just a matter of time before Microsoft will cease providing
updates to XP with only SP-1. Further, any new software developed will
probably assume SP-2. So, unless you have a really good reason not to
install it, like it "breaks" a program that you feel is essential and there
is no easy update/upgrade path, install it now, or someday you will wish you
had.
By the way, if the prospect of downloading SP-2 frightens you as it did me
(when I had a 56K modem), be aware that Microsoft will send you a free copy
of SP-2 on CD. Unlike SP-1, they do not even charge shipping or handling.
Further, SP-2 is not copy protected, and in this one case Microsoft even
suggests that you share it with your friends. I quote from the wrapper on
the CD: "Share this CD with a friend! After you have installed Service
Pack 2, you can give this CD to a friend or family member using Windows XP."
Note that the same CD works for XP home and XP professional.
See this link, mid-page, right side for info on getting the CD:
http://www.microsoft.com/windowsxp/sp2/default.mspx