I had same problem on my WinXP_HomeED (with "Automatic Updates" enabled) before install SP2: When I try to respond an update reminder with "OK" as usual, the update icon on taskbar kept 0% progress forever and could not be removed. What I did was went to MS' WindowsUpdate homepage, scanned again for new updates, found that new SP2 is the only major update I need. After I download and installed SP2 for WinXP, the problem is gone.
You may want to try this, and remember to read some SP2 related articles before doing SP2 update.
Good luck.