I don't think it was upgrading to SP3 specifically as my system came with SP3 installed and no such problem at the start.
So it is my guess that it was a subsequent windows update or updating IE (which does all the display work in the OS) from IE6 which was part of XP, to IE7, to IE8 may be more likely. If you recall that the dreaded Rex X in IE when browsing and an image isn't displayed.