First of all, we are going to need more of your system specs if we are to help you. Sometimes, knowing the platform or mobo can make all the difference...
As for the installation of the memory stick, I'd try resetting the BIOS before installing it and once the computer starts enter the bios and set up some modest timings/speeds. Also try booting up with just the stick you think is bad. Also, slots can be all the difference with installing two memory sticks, so expirament with all the different slots.
In regards to your question about the service pack, I think it's time you're introduced to nlite ( nliteos.com ). nLite allows you to easilly slipstream a service pack directly into a windows installation, along with helping you disable unncessary xp features and customize settings by default in the installation (plus, you can integrate hotfixes (RyanVM releases a complete pack of hotfixes often)). Basically, you copy all the contents of your XP cd to a folder on your HD and download the service pack (I got a SP2 cd for FREE from MS by signing up on their site, since I have dialup), and once you set all the settings and edit the installation, nLite can create a bootable ISO cd image to install XP from (new nlite even has CD burning builtin). Then, just run nlite to customize the installation (it's pretty simple, but there are many guides available if you do a search).
edit: If the stick is bad, it's bad. Almost all memory has a lifetime warranty, so you'd be best to just rma it. Seeing as it won't boot by itself, it is unlikely the BIOS that's the problem.