<<So do you advise that I install SP3 and IE8 to my clean install of XP Home?>>
Sure, I don't believe in making life easy for malware or those delight in inflicting the unsuspecting/uncaring with such.
If your clean install reflects (either) SP1 or SP2...you can just install SP3. Available for download at http://www.microsoft.com/downloads/details...;displaylang=en
OR you can use the Windows Update site.
<<Any advice on how to do this best?>>
If you have a broadband connection, it's best to download from the link above. Save it to desktop, install from there.
Later, that same download can be used to update your XP install CD (not recovery/restore CDs) via slipstreaming. That would prevent future problems when attempting to either run sfc /scannow or do a repair install of XP.
IE 8 can be obtained from the Windows Update site.