You're both correct.
Edit - Just noticed you didn't mention this. Athlon XP retail HSFs have a "thermal interface pad" on the bottom of them. While it's not as good as a thermal paste, it's more than enough to cool the chip properly and
much more idiot-proof for Joe End-User.
As they come from the box, a stock XP with a stock cooler and thermal pad,
running at stock speeds, will be just fine. If you want something quieter, cooler overall operating temperature, overclockability, or all of the above - thermal paste and an aftermarket solution is the way to go. Basically, it depends on what you want to get as an end result.
- M4H