I've just carried out my first Windows XP SP3 install and I'm pleased to report that things went just fine.
I downloaded the XP SP3 bits from TechNet (if you're a subscriber look for it on the top downloads page - it's also available on MSDN). The download is 544MB and the MD5 hash (for those of you interested in such things) is 308245853e5b231343ee17b36ffda1e6. Final build identifies itself as Version 5.1 (Build 2600.xpsp.080413-2111 : Service Pack 3).
Note: The above is the .ISO download from TechNet/MSDN. The official .exe download available from Microsoft is a 316MB download. The MD5 hash for this download is bb25707c919dd835a9d9706b5725af58.
For my first install I applied SP3 to a VMware virtual machine running a fully patched XP SP2.
There's very little to the install (as you can see from the installation gallery here) and for me the whole process took 20 minutes. However, this was on a high-spec system and Microsoft recommends that you allow up to two hours to complete the install.
If things go wrong and SP3 causes problems, the service pack can be uninstalled. However, in the interests of safety it might be a good idea to have a backup.
Later on I'll have some detailed benchmarks, along with a better idea of how long the update process takes on low-spec systems.