Sometimes, when you’ve got Visual Studio 2005 installed and are using automatic updater, or manual updating, to install service pack 1, it can fail with very little indication as to why. If you search the event logs, you may see something like the above.
It happened to me on windows server 2003 where I was setting up a biztalk development environment, but it can happen on xp as well apparently.
Turns out there is a bug in windows causing it to fail to validate the signature on one of the files in this update pack, and thus windows (quite correctly) refuses to install the patch.
A hotfix has been provided by Microsoft for Windows server 2003; it weighs in at a mere 800kb and solves the problem quickly and easily. Go grab it.
Unfortunately it appears no such fix has been released for XP. There are workarounds listed on the above link as well though I haven’t investigated them at all. They’re worth a shot, leave a note here if you find them useful.