Windows Server 2003 R2 update fails

Hello, I am having a problem running windows updates on fresh install
of Windows 2003 R2 Server which is configured as a member server (not
a domain controller).

1. Install fresh
2. Join the domain
3. Add domain user account to local administrators group
4. Log on with domain user account
5. Run windows update to install latest SP2 ----- FAILURE

Logging on as Local Administrator does not solve the problem either.

However, if I logon as domain administrator, then update sucessfully
completes.

This consistent behaviour observed on multiple computers.

Any ideas?

VT