Word for the wise. If your w2k installation is old and has lots of apps installed, sp3 might break some stuff. The best time to update everything is just after you've intalled w2k. Then all the apps go on top of the elephant instead of under its feet while sp3 is installing.
SP3 won't give you any proformance gains that I know of. Just fixes the many security bugs and probably gives you better compatibility on older games and programs. But like Audioaficionado said some programs won't like it. I know Norton system works will ask to be upgraded if you try to run certain options such as speed disk.