There apparently are some minor conflicts between the timestamps of the in-the-box NVidia drivers in XP SP2 vs. what the newest downloadable public drivers are. There are also some minor issues, if you have already installed a few of the up-to-the-second hotfixes, that were released just before SP2, and therefore not included in SP2.
Installing fresh isn't required by MS, SP's are designed to be installed overtop, but in 99% of the cases of problems that do arise in SP upgrades, those same issues generally dont happen, if you slipstream and install fresh, which is why I prefer that method.
Either way, it's not a bad idea to make a Ghost backup of your current existing OS installation, in case something should go wrong.