I realise am about 2 years behind the times here, but I tried to install SP2 back then, and had the same problem. If I install sp2, the system will not detect the modem. If I try to install it manually, I get something like "the modem can't start code 10." When I first got the xp2 CD, I tried installing it fresh, wiping the HD, installing the original XP sp1 cd, then the SP2. It ALWAYS does the same thing. I even tried a different modem. Both modems work fine under sp1. The one I am trying to use is a Stratitec IC56A, which is an Agere win modem. I know there's nothing wrong with the modem, and I have the latest DRIVER for it, so it has to be caused by SP2. I haven't been able to download windows updates in ages, and its getting really bad. I have a virus I can't get rid of. I want to do a clean install, to get rid of the virus, but that still leaves me with the problem of not being able to update windows because I don't have SP2 installed. I am pulling out whats left of my hair, PLEASE help.I found this. I hope it helps you.
http://support.microsoft.com/kb/310123