I installed Windows XP SP2. It ran without issue. Many people complain (most recently the Wall Street Journal) that SP2 does not include as part of the offering anti-Spam, anti-Spyware and anti-Virus. These are the same exact people who would complain that Microsoft is putting these independent third party people out of business. You can’t have it both ways.
XP2 is good enough. It automatically puts on your firewall and adds a pop-up blocker to IE, even though I run the google and msn toolbars, now I have three pop-up blockers. My system seems stable and they have worked on the WiFi dialogs, lets see if it is any easier to connect to a local access point. The new “Security Center” may not be perfect but at least is a step in the right direction and future versions of Windows I am sure will build on top of this.
As for programs not working, we all knew this. If you are doing remote debugging with VS .NET or SQL Server you may have to tweak your system to accept the client requests, etc, but most non-developer and non-admin stuff will run fine. Microsoft has a list here.
So go install the damn thing.
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Disclaimer The opinions expressed herein are my own personal opinions and do not represent my employer's view in anyway.