Hmm, you should have no problems. How are you getting the update? Cd, or download?
As long as you have Windows XP, Service pack 1, you should have no issues what so ever going to service pack 2.
Luckily though, it would have saved the old one I think. Try pressing F8 at bootup and going to 'Last Working Configeration' and if that doesn't work, try pressing F8 and going to Safemode.
If this works, it should ask 'Do you want to run system restore, or continue?'. Select to run system restore. Go back a day or so with this by selecting an earlier time. It should have made one.
If it doesn't automatically come up, you'll have to go to Start, Accessories, System Tools, System Restore.
Hopefully then, Windows XP Service Pack 1 will be re-loaded with no issues.
If this doesn't work either, you'll have to re-inert the Windows CD rom and try to re-install windows on top of the old one.
If Safe Mode works, I would back up at this time, just incase you have to re-format the drive, or you lose data, or place a hard drive as a master with windows already on to save data.
Its very weird though. Definitley no reason why it should have gone wrong. Many people have downloaded SP2 with no issues, though maybe a connection fault or something caused a problem?
I hope this helps