Questions about Windows XP SP3?

I installed Win XP SP3 specifically for playing GTA IV, I obtained it from a friend, therefore it is not genuine, but I have encountered some problems, so is it absolutely necessary to revert back to SP2?

Here they are:

Constantly Reducing Space on the C: Drive. I noticed that it is not just dropping but fluctuating. I removed a lot of downloads from the My Documents Folder, and I also tried cleaning the drive, but it still dropped as low as 168 mb. I suspected it to be spyware, and I installed this free Anti-Spyware Software, Spyware Terminator. It detected something in the win32 folder, and denied it access The space on the C: Drive vastly increased, up to 2.21 GB, but now, it still fluctuates between 2.28 and 1.90 GB. I don't think that thing has completely gone.

And....the printer didn't work at first, but I don't exactly know...we called a technician, it worked, but later, more recently we had to restart it for it to work.

In an unrelated incident, the keyboard stopped working due to damage.

BTW, when we had SP2, the system had to always undergo disk checking at startup, it doesn't happen now unless there is a succession of inadvertent restarts.

So, my question is, is it absolutely necessary to switch back to SP2 or just reformat the system to rid it of the spyware or something?

I heard that SP3 causes problems, but I only changed to it to play GTA IV (which I have now successfully completed, except the Fixer's Assassinations) so, please help me with this judgement..........