I use XP SP1 and have an ATI X800XT PE video card too. Since I will not go to SP2 (SP2 is not game friendly), I use the last ATI legacy driver that did not require SP2/.Net.
I'm not home at the moment, but I think it is ATI driver 5.1 or 5.2. Go to the ATI site and check it out (the "Readme" portion will tell you if it needs SP2). The other thing that I found is when I tried to update my drivers without using the CCC, SH3 actually ran a couple of FPS slower in the harbour with the HT mod.
The only "down side" to using the older drivers is that you do not get some of the "newer" ATI features like Adaptive AA, but that is a SMALL price to keep SP2 off my game PC.
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