Have had the same problem, with both XP Pro and Home, and what I found was that if the older computer is under 700MHZ speed and has less then 256M of memory SP2 will not load and causes all sorts of problems. So I have the older computer running without SP2 until I upgrade the CPU and memory, or get a new computer.
Spent too much time yesterday trying and failing to update old computer with XP SP1a using widows update. Haven't updated in over 2 months as computer has not been used. Tried to turn on automatic updates and download all new updates. Was able to download and install MS Networking and other programs (adaware, atomic clock) with no problems. Each time the error message says I do not have permission to update--I do have administrative priviledges and XP has been registered and activated. I have checked all the security and local policy entries under administrative tools. Any help on this would be greatly appreciated.