If you satisfied that your system is running smoothly, hold no fears about SP2, which includes all the SP1 updates plus those since.
You should first create a System Restore point and its name should clearly indicate that it was done for this purpose; the day and date are included automatically.
Ensure that you close down all running programs, utilities, screensavers etc before installing SP2.
If you do, by any chance, experience problems you can uninstall SP2 from Add/Remove Programs and use the System Restore point - however it's very doubtful you will need to do so.
Then install a superior firewall such as ZoneAlarm (free) and disable the Windows firewall.
SP2 is basically intended to make a system more secure for those who don't or can't be bothered to maintain levels of security, but addresses other issues as part of the operation.
Overview of SP2 at: