Technical Support - Using XMP in CS2 with ACR 3.7
Before we go any further, there's one proviso on using XMP with CS2. You must be running ACR 3.7, which is the latest version for CS2. If you use an earlier version, settings will not apply in the same way, so your images will not look the way I've intended. We'll come on to how you check which version a little later on when we set ACR preferences, and you can download the update free of charge from here for Windows or here for Mac.
Firstly you need to put the XMP files into the same folder as their raw files. The XMP files will be in a zip folder on the FTP for easy transfer, so you need to download it. Then double click to open the zip. Copy the XMP files into the same folder as the raw files, so that they appear like this:

If this is the first time you've used ACR (Adobe Camera Raw), then we need to set it up.
First let's check the preferences. On Mac, this is under the Bridge menu. On Windows it's under the Edit menu.
First Camera Raw Preferences... the main thing to look for here is do you want the sharpening turned on or off? Also, double check that you are running version 3.7. If not, the download links are at the top of this page - stop and run the update before we go any further.
Then on to Main Preferences under the Advanced section... checking the 'Double-Click Edits Camera Raw Settings in Bridge' leaves Photoshop free to continue working while Bridge processes the raw files in the background. It's very useful if your computer is capable of doing more than one thing at a time!

Finally, let's go into ACR itself, and check the image settings. Choose your colour space, whether sRGB, Adobe RGB, or something else. 8 bits/channel is usually plenty, and the only option if you're converting to jpeg. Choose your native resolution - the others have +/- signs against them. And the ppi/dpi tag as well.

You'll be pleased to know you only have to do that setup once!
Converting the Images
Open Bridge and make sure the files are recognized. They will usually have 5 stars, and a little 'Settings' badge in the corner. You don't need to wait for the images to finish updating previews before converting, but you can do so if you wish to check them for tweaks before converting.

Converting the Images - Option 1 - Full Resolution Images
If you want full resolution images to process in the background, this is best done within ACR. Select all files, and double click to bring up the ACR window.
Click Select All, and then Save Images...

Choose your destination folder and file type and hit Save. This will bring you back to the previous dialog, when you can hit Done. It will continue processing in the background.

Converting the Images - Option 2 - Image Processor
The other way of converting your raw files is using Image Processor. This runs within Photoshop itself, so you can't do any other retouching while it's working, but it does give you the option of alternative sizes.
You must have run through the initial ACR setup steps first, in order to set the sharpening, colour space, and so forth.
Go to Tools > Image Processor.
Set your options - for example, Save in Same Location saves a subfolder of your files. You also have the option to resize to fit within maximum dimensions - so 800px x 800px would turn a rectangular image into 600px x 800px.
You're all done!