First, most motherboards do not need to have major changes to the BIOS when installing a new version of Windows. There may be some settings that you will want to change, however.
Caution
Don't update the BIOS unless there is a clear reason to do so. A BIOS update always has the risk that the computer will not work once updated. BIOS updates are not going to improve the computer's performance; they are to fix specific problems.
Some ideas to determine whether a new BIOS version is needed are:
[lb] Do you have new hardware that does not work correctly with the current BIOS? The most common item is upgrading to IDE/ATA drives greater than 137 GB in size on a motherboard that is limited to 137 GB. Not all motherboards have BIOS upgrades to allow these drives to work acceptably.
[lb] Your current BIOS have known issues with the new version of Windows. How do you find out (without trying to install first)? Go to the computer or motherboard manufacturer's support pages and look at the BIOS updates. Manufacturers usually will list a summary of changes for a specific BIOS version.
Note
Much like Windows Service Packs, BIOS upgrades are cumulative. Each completely overwrites the previous version of the BIOS.
Fortunately, the great majority of BIOS upgrades may be 'back dated' to the original BIOS if you have a copy. For that reason, it is a good idea to download all available BIOS updates, so that if one doesn't work properly for your computer, it will be possible to go back to the original or an intermediate version of the BIOS.
An example is a computer that the author has. This custom built computer uses an ABIT KT7-RAID motherboard. The board is actually about four years old, with an AMI Athlon processor. Because of its age, it doesn't (yet) support drives > 137 GB. However the desire for a bigger drive (the price of a 200 GB drive is about $100 and dropping) has convinced me that it was time to upgrade. However, I want the drive to be supported.
With my favorite web browser, and navigate to the ABIT home page. A few clicks later, I reach the BIOS update section for my motherboard (Figure 3). (Notice the ambiguous wording in the description for version 7N, it is not 100% clear whether this version will work or not.)

Figure 3-We see that BIOS version 7N supports drives over 137 GB, so I would get either version 7N, or A9.
Also needed, but not shown in this figure, is the BIOS flash program. Though ABIT has a Windows based BIOS upgrade program, this program does not support my KT7 motherboard, so the boot from diskette method is the method needed to update the BIOS. Instructions to do this are included on the ABIT BIOS web pages: create a bootable diskette, copy the bios files, and the BIOS flash program to the diskette, boot the diskette, and run the flash program.
When in stalling Windows, there are several BIOS settings that should be changed. Though it is possible to install Windows with some wrong settings, the installation process will be much smoother with the correct settings.
The order that the computer selects devices to boot from is important. Normally, we boot the hard disk drive (the C: drive). However if there is no operating system on the hard disk drive, many computers will simply hang or freeze. Some display a message to the effect that there was no boot device, or other error message.
When installing Windows XP, we are going to want to boot the CD drive. Many computers are configured to try the CD drive for a bootable CD. If the CD in the drive is bootable, the BIOS will prompt (usually saying: "Press any key to boot from CD...") and wait a short time for a reply. If the user doesn't press a key, the computer moves to the next boot device. The next device may be the floppy drive, or the hard drive (depends on which is configured in the BIOS).
Tip
Virtually all BIOS and computers will boot correctly to the hard disk even if the CD or diskette drive is earlier in the list of boot devices, and there is no bootable CD or diskette in the drive.
It is a good idea to set your boot order as A:, C:, CD if you plan to install Windows using boot diskettes.
If you are installing Windows from a direct boot of the CD (which is the easiest method to do so) then the boot order CD, C:, A: would be the best choice.
Note
Some BIOS do not have the same boot orders as described above. If you don't see the options as I've shown them, experiment with a setting that is as close as possible. The basic idea is to make the device you are installing Windows from the first boot device if possible.
Some computers have the option to boot from the network. If your BIOS is configured for boot from network, disable the option, at least until Windows XP is installed. Unless your computer will be booting from a network, this option simply slows down the boot process unnecessarily.
Once your installation is complete, you can reset the boot order to C:, CD, A: (or whatever other order you wish) and that will make the boot-up process a bit faster as the computer won't have to check either the CD or the A: drive for a boot disk.
Some BIOS offer a crude form of anti-virus protection, which monitors writes to the boot portion and the partition table of the hard drive. When the BIOS detects an attempt to write to these areas, it will block the attempt (sometimes prompting for approval before continuing). However, installing Windows will modify the boot sector, and often the partition table as well. For this reason it is important to turn off the BIOS anti-virus features.
Note
The BIOS boot and partition table area protection was quite important in the early days of virus attacks. Today's virus programs can find much easier ways to infect a computer than to modify these two areas.
In turning off the BIOS anti-virus you are not opening your computer to much risk at all. However, if you are more comfortable with this feature turned on, you may reactivate it after your installation is complete.
This option enables the BIOS Plug and Play interface for the operating system. Most computers work fine with this setting enabled, but turning the Plug-n-Play Operating System setting off will not create problems for either setup, or Windows once it is installed.
Unless you are using a USB keyboard or mouse, this BIOS setting is best turned off. Windows XP will use its own USB drivers. The main purpose for the Legacy USB Support setting is to enable the USB keyboard and mouse to work when not in Windows.
If you have a standard keyboard, but a USB mouse, it is likely that you will not need Legacy USB Support as Windows will support USB mice.
Here is a new BIOS feature that you either love, or hate. Before Speech Post Reporter (SPR) when a POST error occurred, there was only a vague series of beeps from the computer's internal speaker to alert you to the problem. With SPR, the BIOS POST will report both errors and progress in a vocal manner. (Uh, no, not "I'm sorry Dave, I can't do that" however.)
Some other settings that you should check include if there is more than one video adapter (e.g. motherboard and AGP) setting the correct adapter as the one to use.