Adam, what you need to do is disable the automatic updates feature.
To do that, right click "My Computer" (either on the desktop or start menu).
Click "Automatic Updates".
Remove the check where it says "Keep my computer up to date..blahblahblah".
Click "OK".
This is very inadvisable, but it will stop you system from repeatedly prompting you to install SP2.
The best way, of course would be to backup any data you want to keep, format your hard drive, and install Windows XP from scratch. Upgrades are fraught with problems and starting clean is always advisable.
I suggest this because if you have Windows XP you MUST get SP2. It has many security updates and fixes for XP and IE. Plus, future updates will require SP2 be installed before they will install.
Burying your head in the sand just leaves your ass exposed...