Yes, install it, especially if everything is working well.
Create a System Restore point, close down everything that is running and then install.
If you do, by any chance, have any problems you can uninstall SP2 from Add/Remove Programs or revert to the System Restore point.
You can use the Security Centre to disable XP's firewall and Pop-Up stopper (the latter also from IE's Tools>Internet Options>Privacy tab) as you desire.
I installed SP2 10 days ago and nothing amiss has happened to date (famous last words?).