Captain Sensible: As far as I can see, you've got to get the damn thing done or else you don't get any further Updates and therefore no future protection.
Just to report that despite declining SP2, I've had a few further automatic updates offered and installed today:- KB numbers KB834707, KB840987, KB873376, KB841356, KB841533 and KB873374. Four of these are said to be security updates for XP, and one is an update to IE6 SP1.
So it looks like MS will still carry on patching XP SP1 if SP2 isn't installed.