This is what I consider the proper order to install XP, its updates/drivers/patches and applications.

1.  XP

2.  SP3 (If you didn't make a slipstreamed CD)

3.  Chipset drivers

4.  Video Card Drivers. (run disk cleanup)

5.  NIC/Modem Drivers and ISP software

6.  Windows Update, High Priority Updates (SP3 if you didn't download ahead of time)

     + Windows Update, Optional hardware updates

     + Windows Update, Optional software updates (don't load unnecessary items)

7. Other Drivers (try to automatically update first) (run disk cleanup)

8. Backup

9. Create partitions for Docs, data, etc...

10. Major applications. Fully update each application before installing the next.

11. The rest of your apps. (run disk cleanup)

12. Anti-Virus software and update it.

13. Configure email, move My Documents to another drive

14. Cleanup System Tray, organize Start Menu, activate XP

15. Safe Mode, disk cleanup (advanced) and defragment.

16. Backup

17. Tweak it!

18. Backup