Microsoft is delaying the release of Windows XP SP3 because of a “compatibility issue” between the service pack and Microsoft Dynamics Retail Management System, retail chain management software for small to medium sized businesses.

The code-base for XP SP3 was finalised last week and was planned to be made available on 29 April, 2008.

In a statement, Microsoft said: “In order to make sure customers have the best possible experience, we have decided to delay releasing Windows XP SP3 to Windows Update and Microsoft Download Center.”

To make matters slightly worse, the glitch also exists between Microsoft Dynamics Retail Management System and Vista Service Pack 1, which is already in widespread use. Vista SP1 has been pushed to customers via Automatic Updates from last week.

“To help protect our customers, we plan to put filtering in place shortly to prevent Windows Update from offering both service packs to systems running Microsoft Dynamics RMS,” Microsoft said. “Once filtering is in place, we expect to release Windows XP SP3 to Windows Update and Download Center.”

Microsoft advised those running Microsoft Dynamics RMS to not install either service pack. The company said a “fix is currently in testing and will be available as soon as that process is complete.”

Tagged microsoft dynamics retail management system, windows update, windows vista service pack 1, windows vista sp1, windows xp, windows xp service pack 3 and windows xp sp3