Had same problem. What I did was:
1. Stopped SERVICES.MSC Automatic Updates and BITS
2. Removed C:\Windows\WindowsUpdate.log
3. Removed C:\Windows\SoftwareDistribution folder
4. Re-Register C:\Windows\system32\muweb.dll, as well as all associated
C:\Windows\System32\wu*.dll
regsvr32 /s c:\windows\system32\wuapi.dll
regsvr32 /s c:\windows\system32\wuaueng.dll
regsvr32 /s c:\windows\system32\wuaueng1.dll
regsvr32 /s c:\windows\system32\wuauserv.dll
regsvr32 /s c:\windows\system32\wucltui.dll
regsvr32 /s c:\windows\system32\wups.dll
regsvr32 /s c:\windows\system32\wups2.dll
regsvr32 /s c:\windows\system32\wuweb.dll
5. Cleaned out C:\Windows\Temp folder
6. Cleaned out Temporary Internet Files
7. Turned off Control Panel | Automatic Updates
8. Restarted SERVICES.MSC Automatic Updates and BITS services
Performed Microsoft Update.
Waited quite a while ... monitor
C:\Windows\SoftwareDistribution\DataStore\DataStor e.edb file. Should grow
to about 11-12MB.
Remember to turn Control Panel | Automatic Updates back on when done.
"dsom" <> wrote in message
news: oups.com...
> All my computers show this as the first update:
>
> Security Update for Windows XP (KB921883)
> Download size: 0 KB , 0 minutes
> A security issue has been identified in the Server service that could
> allow an attacker to compromise your Windows-based system and gain
> control over it. You can help protect your computer by installing this
> update from Microsoft. After you install this item, you may have to
> restart your computer. Details...
> Addresses a critical security problem
>
> Installing it causes the rest of the updates to fail. I was able to
> install them all manually but I suspect WindowsUpdate is now damaged on
> my system.
>
> I uninstalled the update with add/remove programs and all updates still
> failed. I system restored to two days ago and all updates still
> failed. I rebuilt CatRoot2 and all updates still fail. I am open to
> suggestions 
>