SC 1 came out in 2002 like you said, and that's when XP SP1 came out, so XP SP2 should be good enough. Note that Windows has a Compat trouble shooting diagnostic that can also verify which is best to use.
For redist folder, when you right click the shortcut and go to Properties, the main page Properties takes you to will have an Open File Location tab at the lower left. It should be there.
Typically that is the game's main directory that has the launch exe and necessary files to run the game, and is all in a folder labeled by the name of the game itself.