A/ The SP1 update is for the 2007 compatibility pack not for your Office XP Pro.
B/ The updates are to close holes in 2007 files which may contain a virus. If you can open a 2007 file then you could execute the malicious code contained in it. The updates prevent that.
I dont know if you will be able to work with the VSTO files as you will be using the Office XP version and they may have been compiled using VS 2008.
I know there are always compatibility problems opening files with an older version than the one they were made with.