Sysprep regenerates the SID of a computer on startup. If you wouldn't do this all computers would have the same SID after deploying images.
So basicly what you do is
run sysprep -> turn off PC -> create image
install image -> start PC -> sysprep regenerates SID
note: there are other tools that can reset the SID but only PC's reset with sysprep are supported by Microsoft (don't ask me why)
sysprep will also resize the pagefile if a system has more RAM and rescan your PC for new hardware (all things newsid doesn't do)
Install the files in c:\sysprep\
This directory will be removed after running sysprep.
If the administrator password is not null at the moment, sysprep won't be able to change it.
Save sysprep.inf in c:\sysprep\sysprep.inf
Check minisetup and click on reseal. The next time you'll boot sysprep will regenerate the SID.
So it is very important to not boot Windows XP after running sysprep.
Don't install Microsoft Windows Media Player 11 if you are going to use sysprep.
If you don't use drivers that are included in windows XP you should place a copy of the installation files on the C: drive. Sysprep removes the NIC drivers and reinstalls them.
contact me at kristof dot vansant at pandora dot be