Well I finally decided to upgrade this morning, being overseas without all my software and stuff I had been deliberating for a few weeks. However, after trying the service pack in a virtual machine and hearing about speed improvements, I took the plunge.
The update went smoothly, and the only problem so far is the virtual pc’s networking has lost the plot again, but that’s not too difficult to fix. The speed improvement is definitely real though, during Windows boot the loading progressbar doesn’t even get across once now and the desktop is fully loaded in about 5 seconds after logon, which is a noticeable improvement over SP2.
Now with Firefox 3 only a few weeks away, much better productivity appears to be on the the horizon 
UPDATE: There appears to be an updated version of Virtual PC 2007 for XP SP3, read about it here.