Many thanks for the replies, I will post what I found out here.
If you upgrade to SP3, and have IE7 or IE8B1 installed, you cannot easily uninstall either of these. You would need to uninstall SP3 before you could remove IE7 or IE8 Beta 1. Be warned!
Also, if you run the SP3 update it installs an out of date version of Flash Player - this is what broke my website. It is important to update your Flash Player as it is vulnerable to attacks, according to several sources.
Many thanks for your help and suggestions which pointed me in the right directions!
There is a useful forum post about this here: <snip> that led me to download the latest version of Flash Player, et voila the site now works fine. I am writing a message for potential visitors to the site who may be experiencing similar problems.
[edited by: jatar_k at 5:05 pm (utc) on June 21, 2008]
[edit reason] no urls thanks [/edit]