Microsoft Corp. has delayed the release of its third service-pack update for Windows XP, blaming a "compatibility issue" between the software and its point-of-sale application for small and midsize retailers.

Microsoft said last week that it had completed development of Service Pack 3 (SP3) and released the update to computer makers and its volume licensing customers. The new release was scheduled to be made available via Windows Update today.

But incompatibilities discovered in the past several days between Microsoft's Dynamics Retail Management System (RMS) application and both Windows XP SP3 and Windows Vista Service Pack 1 are forcing the software vendor to hold off on releasing the XP update.

Microsoft said it is putting filters in place to prevent Windows Update from offering both the XP and Vista service packs to systems running Dynamics RMS. Once the filtering capabilities are turned on, Microsoft plans to release XP SP3 via Windows Update and its Download Center Web site for deployment by customers that aren't running Dynamics RMS.

The company didn't say how long it would be before the Dynamics RMS filters are ready to be activated.

A fix to the incompatibility problem between the application and the service packs is being tested and "will be available as soon as that process is complete," Microsoft said. But it didn't disclose a time frame for finishing the testing. Instead, the company recommended that users visit its TechNet forums for more information regarding XP SP3.

In the meantime, Microsoft is recommending that Dynamics RMS customers not install either XP SP3 or Vista SP1, which has already been released to users via Windows Update. For more information, customers running Dynamics RMS should contact Microsoft's customer support organization, the company said.