If I run the SP1 installer andI try and select Update for the top level action, it gives me an error saying that you can't install Exchange on XP. Even though I only want to select update for the admin tools component. But if you try and select update for the admin tools component it says you have to select an action at the parent level.
As far as an issue with Outlook and System Manager on the same machine, can you give an example of what kind of problems it would cause? I've been running in that configuration and haven't ever noticed anything that wasn't working normally. I've encountered the SP1 install problem on a clean workstation without Outlook as well, so I know it can't be blamed on an Outlook/Exchange conflicts.