The following is from a blog at TechNet that answers what is the minimum server pack level for windows XP to be able to utilized GPO preferences. (http://blogs.technet.com/askds/archive/2009/06/18/migrating-from-policymaker-to-group-policy-preferences-with-gppmig.aspx)
Windows Vista RTM and Service Pack 1
Windows Server 2003 Service Pack 1
Windows XP Service Pack 2
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