I've been using it since it came out, and I've never had any problems. People get frustrated with it because of some of the security features, like the IE enhancements, port limitations that hurt bit torrent, and the lack-luster firewall. None of this has been an issue for me, however, since I use Zone Alarm and Firefox, and there is a patch you can apply to un-cripple your port allowance. I assume that some of the problems others experience also stem from applying it as a patch, rather than from direct OS installation; you might want to download the sp and slipstream it into an XP disc, then you'll have it perfectly installed on the next format/installation you do.
I'd suggest updating to it, just for the system enhancements and overall stability/conformity to the Windows updating system. I'm a sysadmin in the CS department at the University of North Carolina Chapel Hill, and we force it on all XP systems in the building. I've heard that Microsoft might start rolling it up with future updates, so you HAVE to have it if you wanted to employ security patches.