It is always wise to keep up with all
updates both critical and non-critical and that includes all service packs. Microsoft stopped support for Vista (with no
service packs) on July 13 so it wont be too long before support for anything less than Vista SP2 will stop.
A general rule when updating with a service pack - disable your antivirus temporarily. It helps a great deal.
Windows sets how much space System Restore takes up automatically, if it is turned on. You can alter those settings. Read HERE: System Restore - disk space
By the way, there have been many updates since SP2 so keep them coming until Windows says you are up to date.