New KB: Windows Update stops responding
Windows Update stops responding if you click Install to download and install updates for Windows XP or Windows 2000
If you scan for updates for your Microsoft Windows XP-based or Microsoft Windows 2000-based computer at the Microsoft Windows Update Web site, Windows Update may display a list of updates that are available for your computer. However, if you click Install on the Install Updates Web page to download and install the updates, the progress indicator stops responding, and you cannot download the updates.
More on http://support.microsoft.com/?kbid=896227&SD=tech