| Also note that you don't buy POSReady directly from Macro$haft - it's
| provided directly only to OEM equipment makers. But images of the OS
| have leaked out to the public.
|

That's a whole other issue. You're talking about
using an illegal product. On top of that you want to
let it call home to MS for updates? I expect you'd
probably get away with it, but just to be on the
safe side, I don't think I'd call the police to ask
about the best route out of town if I'd just robbed
a bank.

| So for those of you that claim the two OS's could or are likely to
| contain key incompatibilities at the file level regarding future updates
| and patches - there is really nothing to back up such a hypothesis.

I'm questioning whether there's any
value at all in the potential for updates. There won't be any
more updates for IE8, so what patches do you really need?
XP Embedded may not even have standard networking
functionality, in which case you wouldn't get anything like
that. In other words, you won't know what you might
be missing. Yet you're risking XP stability.

There's no way
to be sure what compatibility issues there could be. That's
why Microsoft defines supported vs non-supported.
They promise to maintain supported items. Not so with
unsupported items. They could break compatibility simply
out of spite, to thwart people trying to use this hack.
Similar things have happened with programmer functions.
Microsoft guarantees that supported functions will work,
but unofficial functions, Registry settings, etc -- that MS
uses but doesn't officially offer to 3rd-party programmers
-- often get changed willy nilly. No one can complain
because MS specifically didn't list those functions and
settings as supported.

In any case, suit yourself. I'm just warning anyone who
might want to use this hack that they're taking a chance
with dubious benefit. Personally I wouldn't allow Windows
Update to function, anyway. I'm running XP SP3. If they
came out with SP4 I'd install it only after it had been
out for awhile. If you're worried about security on XP
then *don't use IE*. Beyond that, disable script if
possible, and if at all feasible, do not install Adobe
Acrobat, Java, Flash, or Silverlight. Script is connected
with nearly all online risks. Many depend on one of
things I listed above. None of those things is necessary
for most people. Flash is used mostly for animated ads.
Java is usually only used on corporate intranets.
Silverlight is a failed attempt by Microsoft to create
a highly functional, interactive webpage functionality.
Like Adobe AIR it's been pretty much supplanted by
high-efficiency javascript. Adobe Acrobat is a bloated
mess. There are other, more lean PDF readers, and you
don't need to use PDF browser plugins. (See Sumatra,
PDF-Exchange Viewer.)

For optimal protection you might try Firefox with the
NoScript extension, which allows you to enable script
easily and only when it's absolutely necessary. With that
you'll be far safer than the average Win7 user, and you
won't have to risk your system to Microsoft's beta dripfeed
for another OS.

For further protection, curtail your online shopping.
EBay just got hacked the other day. That's a good example
of new risks. It used to be one had to worry about
wiseguys attacking with malware and ruining one's
computer. Then the risk became Russian and Chinese
criminals, installing sneaky malware that spies to get
credit card numbers or other exploitable information.
Now, increasingly, the risk is in electronic transactions
themselves: online shopping, buying gas with credit
cards or debit cards at hacked gas pumps, using hacked
ATMs, buying groceries at stores with hacked card-swipe
appliances, etc. If you don't do anything on your
computer that requires you to type a charge card or
bank account number then you'll improve your security
a great deal just through that. But of course, that's
not acceptable for many people. If you're an Amazon
addict or EBay denizen you can't afford such risks. Though
everyone can at least avoid online banking.