The update fired up Office to go get a file from the CD. The fix is known, I've used it but it is not to turn off Windows Update. The fix can break something else so if you do this I suggest you uninstall Office and reinstall when you find the CD.
The fix. Go get the Microsoft Installer Cleanup Utility (see google) and delete the items it lists that note Office.
A friend is running Windows XP SP2 and has the Small Business Edition of MS Office installed. After a recent update from Microsoft, he keeps getting a window asking him to insert the Office CD to complete an update. He does not have the CD handy right now and until he does these windows are getting annoying. Any way to stop that until he has the CD handy?