AMD driver theory is plausible, and SP3 installer might have a bug
"If we accept the story that OEMs cut corners on their disc images, it still doesn't explain why WU didn't offer to repair the mis-match as soon as the machines were connected to the net."
Windows Update didn't do the update in this case. The downloader and updater in XP SP3 did. We're also talking about a processor update. Ever hear of downloading a new driver for your CPU?!
Microsoft made Sysprep's limitations quite clear -- oh, for those who don't know, Sysprep is the utility that permits mass duplication of an installed Windows 2000 or Windows XP machine -- and an important limitation is that the target machines' processors must be the same type. This was more obvious back in the day when Windows NT supported four unique processors, but it's still relevant today when switching between Intel x86 and AMD x86 processors.
And now we know why.
Come to think of it, I always wondered why my XP SP2 image wouldn't boot on an Acer AMD laptop. To think I blamed Acer, when the fault was mine. And this had nothing to do with SP3.
As for the SP3 ISO working better than the download, I'd believe Gary's story since the "full file" kit would contain the AMD driver code by default. The online version would only download updates for files it saw, and if there wasn't an amdk8.sys file, it's not going to waste time downloading it.
Sounds like the bug is in the online version of the SP3 installer. And it seems like a simple enough fix -- make sure it downloads all processor-related drivers anyway, regardless of what files it sees.
What about the full-file installer? We see that the ISO download works. What about the huge update you'd download to install to multiple PCs, without needing a CD burner?