A client was getting blue screen errors with STOP 0x0000007E. This indicates drivers or hardware, and given that the machines were fine until upgrading to WinXP SP2 I decided it must be a driver.
Through trial and error I found that Logitech Mouseware 9.76 was installed on the PCs and was causing sporadic blue screens when a USB mouse was connected. Just uninstall Mouseware, let Windows XP install the native driver and all is well.
UPDATE: It has come to my attention that this problem may be related to DeviceLock USB security program installed on my client's computers. It's possible that Mouseware and SP2 alone won't cause the blue screen crashes but that Mouseware and DeviceLock are conflicting.