Microsoft Update Team provide more information and address reports you may have heard about “continuous reboot loops” occurring upon the update to Windows XP SP3.
After investigation, we’ve determined this problem occurs on AMD-based machines with Windows XP images that were originally captured by an OEM on an Intel-based machine. The problem is a registry value, present on images created w/ Intel processors, that causes a driver (intelppm.sys) to load at boot. When intelppm.sys attempts to load on an AMD-based system upon the install of SP3, it causes a blue screen and the continuous reboot. We’re planning to add a filter to prevent Windows Update from offering SP3 to affected systems and are investigating a fix. Any customers affected by this issue should contact Microsoft Customer Support Services for assistance. More information is available in KB888372 and here.