A few people have had crash problems with Repair. A couple people found that repairing items on the ground was more reliable than either equipped or in the inventory. I ran into this once (trying to batch repair a bunch of stuff to sell), but reverting to an earlier save (a couple minutes before) fixed the problem, and it did not return.
A few people also had problems with crashes during or just after saving. In some cases this was due to background programs.
Nobody else has mentioned any problems here with XP SP3, that I have noticed. I don't know much about XP3. Perhaps is enables some background process or changes some security settings that could be interfering with the game? Maybe the crashes were just a coincidence (knock on wood), and not related to the service pack?