SP3 the service pack is not in .ISO form.
It's a .exe so whatever you downloaded is not anything useful unless you are installing from scratch.
Again, there is no known way to use a XP SP3 OS CD to update a XP installed OS to add SP3 without what they call a REPAIR INSTALL which has plenty of downside.
Once in a while you encounter some user that is trying to avoid creating CDs by mounting ISOs. You know to let them soften up by letting them fail enough times until they are ready.
Here's the SP3 Network Full install -> http://technet.microsoft.com/en-us/windows/windows-xp-service-pack-3.aspx
Get the stand alone version.