You actually have a couple of things going on here. Let start with the message "send Error Report Or Dont Send". That message is from XP's error handling services. When XP has a problem, you can choose to send a report to Microsoft that helps them debug XP. One of the nice things about this feature is if there is a fix, you can usuall click a link on the acknoledgement window that will take you to Microsoft to download a patch or fix. It is possible that is when you are getting the option to download SP2.
SpyBot is a tool to remove adware/spyware/malware. It doeas clean up a lot of "junk" on your computer. It may or may not help with your problem. If you suspect you have the bad stuff on your system, I would recommend using this post Start Here
IMHO, I would make sure all viruses, malware, adware, was off of my computer before applying SP2.
Good luck... hope this helps.
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