Yes, you need to install the extensions on XP to utilize GPP. For sure :-]

From: Paul Hutchings [mailto:paul.hutchi...@mira.co.uk]
Sent: Thursday, April 28, 2011 7:26 AM
To: NT System Admin Issues
Subject: Are Group Police Preferences Extensions included in XP SP3?

Struggling to find for sure whether I need to install anything on machines with 
XP SP3 to be able to use Group Policy Preferences in Group Policies?

Does anyone know for sure please?

I keep seeing KB943729 mentioned.
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