For a moment I almost convinced myself that Microsoft was acting in good faith by letting pirated copies of Windows XP use the upcoming Service Pack 2 that includes many security enhancements. The good news didn't last long however, Microsoft has now corrected previous reports and confirmed that SP2 will only install on licensed copies
of the Operating System.
"Recent press reports indicating Windows XP Service Pack 2 will install on pirated or illegal copies of Windows XP are not entirely true," said a Microsoft spokesperson. "Instead, prior to installing, SP2 will check the OS' product ID [PID] against a list of known pirated PIDs. If a PID is found to be invalid, SP2 will not install." This behavior is essentially similar to that of Windows XP SP1.
This come as a surprise because of previous reports quoting Microsoft employees, in the other hand, I can already hear the voices of many blaming Microsoft for this decision.
To round things up... SP2 being offered even to pirate copies would have shown a lot of sensitivity from the software giant (who holds a large and wealthy bank account, btw) however we should admit that they are not doing anything wrong in protecting its flagship product from pirates in a large scale... aside from any issues you may have with MS, it's common business practice IMO.