Normally the "hibernate" option only displays on machines who support
hibernation. Never the less, following hotfix,
http://support.microsoft.com/default.aspx?scid=kb;en-us;893056 , adresses the
issue if the option would have dissapeared after installing XP SP2.
You'll have to do some registry editing though.
If your machine has about 1GB or more of RAM, than you won't be able to
hibernate neither if you have XP SP2 installed. The hotfix for this problem,
http://support.microsoft.com/kb/330909/en-us , reffered to as KB330909
(Hibernation problem on computers with 1 GB of RAM), ought to be included
within SP2, so you cannot install it when SP2 is already installed. And
although "they" say fragmentation could be the cause, I can say that it isn't
because the problem persists after defragmentation.
I hope this helps.