I was pretty nervous updating to it but it turned out fine. I used the standard windows XP update service rather than my usual habit of downloading the redistributable and installing from that so that it's all downloaded in one go.
My cpu is an overclocked AMD 4200x2 and afterwards couldn't detect any noticable difference good or bad testing in 3dmark06, Crysis or anything else which was fine with me.
I wanted it as I was installing the Net framework 3.5 full package redistributable which recommended full system updates before installing it. I was installing net 3.5 so I could install a game mod that needed Net 2.0 to install.
I didn't bother with that game mod in the end but my system is nicely updated for any future needs
Make sure you have enough diskspace before updating to it as you don't want to run out of space halfway through, that would be catastrophic. Also leave the computer alone even when nothing is happening, it's not exactly quick to install and may look like it's stalled at times, but it hasn't.
You don't have to worry about your computer exploding it's just a software update. Even if it goes really really badly and fails completely you could always reinstall windows assuming you have a windows disk and whatever driver disks your hardware needs but hopefully anthing that drastic won't be needed.