<< But if you end up installing new hardware, the dirvers won't be updated unless you reapply the service pack, or the drivers had been slipstreamed into the install. >>
Also patently false.
W2K, unlike NT4, keeps track of what newer drivers are available from Service Packs that have been installed. If you apply SP2 and then later add a device to your computer that has a driver in SP2, W2K will find the driver from SP2.
You should NEVER have to reapply a Service Pack under W2K!