Here is the temporary solution to the inability of Microsoft Update or Automatic Updates installation failure of updates.

Solution: See KB946691

1. Download and Install KB946691

2. Manually Download and install the Office 2007 Service Pack 1 Update

3. Reboot the system

4. Manually download and install individually the remaining updates
KB931906, KB946983, KB947801, KB946974, KB950114, KB950378, KB950113, KB951808.

5. After downloading and installing all the above reboot the system.

If you now run Microsoft Update you will now see that there are no more additional updates to be installed.

You can also look at the Windows Control Panel / Add Programs -- System Updates and see that they have been installed.

6. This does not solve the problem of why Microsoft Update or Automatic Updates for Office after installing Windows XP Service Pack 3 or when running under Windows XP Pro Service Pack 3 does not allow installation updates to complete.

But it does at least allow one to install the updates manually and proceed with the use of their Office 2003 and Window System.