Many people have been having problems getting online after installing Windows XP Service Pack 2. Microsoft has released an update to fix this issue. This is a recommended download for anyone, but especially if you are experiencing issues with getting online after installing Windows XP SP2.
According to Microsoft this “update helps resolve an issue on computers running Windows XP Service Pack 2. Programs that connect to IP addresses in the loopback address range may not work as expected and you may receive an error message indicating you cannot establish a connection. After you install this item, you may have to restart your computer.”
Link to Update Windows XP Service Pack 2 (KB884020):