I am having the above problem (others seems to have reported similar
issues). The downloads seem to work fine but the system hangs when the
installation box appears. I include below a part of the WindowsUpdate.log
file, starting from where the error seems to appear. Similar error ...

We cannot do the Windows updates on our Windows 2000 server using Internet
Explorer 6.0.  The internet works fine but if you click on windows upates
the IE hangs and must be closed thru the task manager.  Nothing loads.  We
have re-installed IE 6.0 SP1 but that did not solve the ...

Home computer, W2K, SP4,  Rollup1.
For several years, I've been using Backup to make an "Emergency Repair Disk"
to my 1.4" A: drive. MS recommends making a new floppy backup when a change
is made in the system, plus backing up the registry to the repair directory.