Hi Clint,
It should work fine.  The install interface should pop up over the logon dialog. You can include the /warnrestart:xxx switch to countdown for xxx seconds before rebooting.   You may also want to check out the following discussions/downloads here on Connect:

Windows XP SP3 installation question...
Windows XP Service Pack 3 Packaging

Kyle,

Thanks for the info!  Can I assume that if no one's logged in and a passive XP SP3 install fires off, a user would still be able to hit Ctrl-Alt-Delete to log on?  Also, I'm guessing that a locked workstation (i.e. someone's logged in but the computer is locked) would have the same behavior?  Please confirm as I've never done any passive installs before via Altiris.  Thanks again!

Clint

Altiris uses a service account to install packages, so it doesn't matter whether a user is logged in or not, and also it does not matter whether the workstation is locked or not. Users can login or log out while this is going on without affecting the install, but of course they should not shut the machine down at this time!

A passive install is equivalent to a /qb! which provides a minimal GUI to let users know that something is going on, but the users cannot interfere with the install.

Just one final note - since the user profile is not accessible during the installation, it would be adviseable to ensure that your deployments are "Per machine" ie with the ALLUSERS property set to 1 (either in the property table of the MSI or on the command line) so that shortcuts are placed in the All Users profile and can therefore be seen by a user when they log on. Depending on the nature of the application, the first time a user starts the app, there may be a repair phase while the user components of the application are installed. This **may** require access to the original source MSI depending on how well written the app is.

The bottom line is that you should test, test and test again for each new app, to ensure there are no deployment issues, before doing any large scale deployments.

Windows XP Service Pack3 with /passive works well using Altiris DS. I have deployed several times this job during lunch time and the result is really good without any issues or user interruption. In the job there is also  /log:c:\Temp\xpsp3.log, just in case to check eventually problems during deployment.

Regards,

Paolo

With "/passive" still in my command-line and Starting Window kept at "Hidden", my SP3 install displayed the Extracting Files and Software Update Installation Wizard progress bar as expected AFTER I checked off that "User Input Required" box!  Thanks for this tip, Kyle!  I previously thought that my missing progress bar may've been due to the Starting window set to Hidden but doesn't look like it makes a diff in this case.
 

Interesting...I would have guessed that using "Hidden" would have hidden the install completely.  The Starting window option really can make a big difference (and you can shoot yourself in the foot if you set a package with no command line that requires the user to click "OK" or Next but they can't see it because you used Hidden, or had the "User input required" box unchecked. 

You mentioned using a UNC; that really isn't necessary and I wouldn't recommend it actually.  Just make the package source the UNC you're using.  The clients will download the .exe file (and anything else you have in that directory) or run it directly, depending on how you have the Task set up and/or the default Altiris Agent settings for task execution (speed thresholds to download or run from server), then execute it.  
The "Command line" you should define is just "WindowsXP-KB....exe" /passive /warnrestart:600 or whatever you want.  Otherwise, the client is going to run the install from the remote UNC path.  If you have a distributed environment, that can get a little nasty (particularly if their network connection drops mid-install).

Also, I would suggest reviewing an excellent Connect article by Symantec's Joel Smith about NS 6 Software Delivery Best Practices.  He does go in to the intricacies of the "User input required" checkbox a bit as well.

Clint,
Do you have your rollout running now?  If one of our comments above helped, please click the "Mark As Solution" link on that post to mark this question as Solved.