I use a full xp install with all networking and other unnecessary services turned off.
Black Viper's guide is good for tweaking, especially the services.msc section:
http://www.blackviper.com/2002/04/17/black-vipers-windows-xp-super-tweaks/
What is the best XP version to use - Home Edition OS?
Also for an XP Dedicated Emulator OS, are XP service pack like 1, 2, and 3 required?
I an assuming that just the XP Home Edition with out any service pack which has been tweaked (refer to link above) is sufficent for an Dedicated Emulator OS...
Look forward to feedback.
D
I just used what I had, which was a XP Pro SP2 disc and product ID.
Since I disabled all the extra features added by Pro, it makes no difference whether it's home or pro edition.
However, if you plan to use remote desktop to do maintenance as yaksplat does, only XP Pro has that feature.
I keep all networking features turned off, so no remote desktop for me anyway.
I doubt there is any reason to install SP3 unless you plan to run PC games that require Windows Live.
The more important thing is to get the 64-bit version if possible and run the 64 bit version of MAME.
It makes a noticeable performance boost in some games.
On my driving cab, it made a couple more games playable that weren't before.
I'm still using the 32-bit version on my main setup and it works fine.
There are supposedly no 64-bit drivers for my Act Labs guns, so I think I'll just leave it.
Another thing to keep in mind is that XP is not capable of Directx11.
Demul v.057 is the only emulator I can think of that currently requires it, but other emulators of newer systems probably aren't far behind.
(Demul does include legacy drivers, but they won't be updated and most of the games that were important to me were unplayable with them)