I'd go with the "only install them to fix the specific problem" route.
Service packs are the ones that should always be current, but even there
I'd say that the cautious admin would only install an SP after 2 or more
post-SP CU's have come out.
I'd agree with Andrew, except that I normally leave the SPs for a couple of
weeks. You'll soon find out quickly via the blogs if there are SP issues
(remember PS2003 SP2, and even further back, SQL2000 SP3 - both caused issues
which were reported VERY quickly).
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