I’ve had this problem once before, but had to research the specific steps in fixing it because I could not remember each and every file involved. This problem cropped up again after I reloaded my son’s PC with Windows XP after moving his hard drive to a different computer. The situation was that you could download updates but they would fail to install.
The solution involves reregistering several Windows Update DLL files. I found the specific steps at wugnet.com, but I will list them again here:
Try re-registering the windows update components. This may help fix a corrupt installer
1. Click on Start and Run,
2. Type “REGSVR32 WUAPI.DLL” (without quotation marks) and press Enter.
3. Should get the message “DllRegisterServer in WUAPI.DLL succeeded” Click OK.
4. Repeat above for each of the following:
Now try to install your updates.
I followed the steps but did not reboot and was still able to install the updates after reregistering the DLL files. Your mileage may vary.