SP2 will be fine. BIOS adjustment to ATAPI would be done before loading XP.  If one was to load XP in RAID mode, then switch to ATAPI, it won't boot. I know you plan on having PC strictly offline, but there's a catch.  XP might only activate online,* and then you can have it back offline again.  *It's been so long since I did an XP load, I don't remember for sure.  But you'll know what to expect, so no surprises.
Hi Gang I have an older Dell Optiplex 980 DT i5 in which I'd like to install Windows XP (offline) using (Genuine Microsoft Full OS Disc) or a Dell Version. BTW the Optiplex DOES have the Genuine OS Product Key attached ... I need XP to run older CD/DVD Printer software that will only work in XP I'd be using the unit strickly OFFLINE (no need for any updates) Thank You ...  
Dell Optiplex 980 DT i5 1st Gen - Windows XP?