I made a slipstream disk too for SP2/xp....zero problems on install
Which lends credence to the warning of not plopping it down on top of another install.
I have a question though...
I presume you did a fresh install. If so, did you backup your C:\ drive first then install XP/SP2 and then do a restore of your data from the backup? If so, what exactly did you restore? Everything but the Windows directory? How does the registry/System State get restored? Do you export it before and import it afterwards?
The testing PC I used was a fresh install after a format with no data to restore back. But my main PC wil be a different story as I have loads of apps and data to bring back as well as a registry.