This little program takes care of everything for you. No messing with extracting a boot loader and crap. Just point it to your WinXP CD and the SP2 file, click a button and it creates a bootable .iso for you.
http://www.neowin.net/forum/index.php?showtopic=188337&st=0
"You can either want something to be true, or you can want the truth. Pick one." - Mr. Diety