Microsoft Website gives out 4 methods to uninstall it in their support document How to remove Windows XP Service Pack 3 from your computer. For some reason first 3 methods did not work for me. It was checking the requirements but when it comes to the uninstalling part it terminate saying files missing.
I was too lazy to go through the method 4 and install a Windows XP again. Again I was stuck when it comes to the serial number as I have been using it already and had to call up Microsoft and get a new key.
Not the best method to solve the issue but a easier way to solve it. If you have important data it is always good to back it up before you perform new installation of OS or upgrade or downgrade process.
I would like to hear how Windows Service Pack 3 is been treating you?