Late response here...but we've upgraded several PCs from SP2 to SP3 without issue concerning VelocityQ. We also have an older Velocity system (same software version as yours), and also had no issues updating XP to SP3.
Now I cannot guarantee you won't have problems. I've seen issues with some of the third party apps (Sonic Reel DVD, Sound Forge) that come with Velocity when updating, where it unlicenses the software and you have to get Sonic and Sony to give you new license codes (a real pain). So if you use those two programs, you might just leave it at SP2. I've always adhered to the policy that if it's not going to give me significant performance or productivity gains, I'm better off leaving a working system the way it is. In our case, we were building fresh systems, so just installed XP, upgraded it to SP3, THEN installed Velocity and all other software.
Hope that helps.
Chris Blair
Magnetic Image, Inc.
Evansville, IN
http://www.videomi.com
