I recently had an issue where my windows updates simply failed to install. They would download just fine but never installed.
I found a fix here:
Go here and see if it works
fix any issues, then validate it.
If it still doesn't work try this
Re-register the Windows Update DLL with the commands below
Click Start, click Run, type cmd, and then click OK.
Type the following commands. Press ENTER after each command.
Attempt to run Windows Update
Now what do you get?
The problem in the thread had a different source than mine, he had cloned his OS onto a new HD. In my case I had a fresh install of WinXP that was barely a month old.