As long as your hardware and software are compatible with SP2, installing it after installing Windows XP on a clean drive is the best way to go. If you really don't want to install SP2, you'll at least need to download SP1 unless it's included with your copy of Windows XP.
Making a CD of the other updates can be a bit tricky. If you install cumulative updates, then smaller updates aren't necessary. Also, some updates need to be installed in a certain order. If someone knows of an easier way to make a compilation of updates, I'd be happy to hear it, and it would be a big help to people. Unfortunately, I don't know of an easy way to do it.