Whether you need to slipstream a service pack or not and whether you need a driver floppy or not are two separate issues.
Think about the partitioning scheme you want to set up. This will determine whether you need to make a slipstream CD or not. Do you want your C: drive to be larger than 137 GB (127 GiB) ? If not, you don't need to slipstream a service pack on a new CD.
The reason for that is that Windows XP RTM (no service packs) will install fine on a drive >137GB, but will only partition and format a maximum of 137GB. (Windows XP RTM does not support 48-bit LBA). After Windows is up and running, you can install SP1 or SP2, and then partition and format the remaining drive space. But that will be a different drive letter, not C:.
Now think about the motherboard SATA transfer mode you want to use. If you use Legacy IDE mode (which you have it set to now) you will not need a driver floppy. Windows will recognize the motherboard SATA controller as a standard IDE controller, and will install properly. After Windows is up and running, you can install the Intel chipset drivers which will provide optimized drivers, but the controller will still be in IDE Emulation/Legacy IDE mode. In this mode, the controller does not support hot swap (useful for eSATA drives), and do not support NCQ.
If you switch the controller to AHCI mode in the BIOS (native SATA mode), the controller then supports hot swap and NCQ. But you will then need a driver floppy to install Windows (press F6 as soon as the blue text-mode install screen comes up. Later in the installation, press S to tell Windows you have a manufacturer-specific driver disk).