Firstly, i recommend that you create 3 new folders, (to create new folders go to start>My Computer>double click on the C:/ drive, right click on the mouse and select "New" then folder. Name the 3 folders as follows:
XP
SP3 (SP2)
Updates
I used to slipstream manually but now there is a great program (free) that will do it all for you called n-Lite. Your first port of call is to download and install .NetFamework 2.0 from Microsoft if you don't already have it installed. To check if you have it go to Start>Control Panel> add remove programs, if its on the list you already have it. If you don't have it i recommend you download it from Windows Update to ensure you get the correct and latest version. (you will need to go to "Custom" rather than "Express" to download)
Once you have ensured Microsoft's .Net Framework 2.0 is installed you need to download and save XP Service Pack 2. Save to the SP2 folder you created earlier.
Download Service Pack 2 Here .
Even if you have Service Pack 2 on disc, don't use it as you need the "full" IT version, to download it click here: Service Pack 2. (note:Save to the folder you called SP2, it will make it easier to find)
The next step is to download and install n-Lite from
http://www.nliteos.com/download.html. or 
n-lite is the program that will integrate Service Pack 2 and Windows updates with XP, so you can burn a new disc. Right, lest get started and slipstream your XP disc.