Okay everyone I thought maybe some background on the root of the problem would help. Windows XP used a fast and great mechanism called Hotfix Installer (Update.exe) to install updates. Updates installed in very little time (if you want to even reduce update time on XP, temporarily stop the System Restore service) and updates will install at crazy speeds. It works by simply installing a new version of files to be updated at C:\Windows\system32 and C:\Windows\system32\dllcache (the Windows File Protection cache). This is File Based Servicing. The hotfix installer (Update.exe) also supported various command line switches like /nobackup which means not to backup files it patches as you won't be uninstalling any updates and would save disk space by not backing files up. It also supported the ability to slipstream a service pack or update into the original XP setup files using the /s switch.
When Microsoft was developing Windows Vista, they realized that components had gotten too many interdepencies on each other and to service/patch each file reliably without breaking another component that relied on it, Microsoft introduced what they called as Component Based Servicing (CBS) (read all about it in The Servicing Guy's blog: http://blogs.technet.com/b/joscon/). What it does basically is it installs the entire OS's all files including all languages and all drivers shipped with the OS into C:\Windows\WinSxS and then it hard links files from there to C:\Windows\system32. Whenever an update is installed, it no longer installs it to C:\Windows\system32 and C:\Windows\system32\dllcache like XP's hotfix installer (Update.exe) did. Instead, it updates the files in C:\Windows\WinSxS. Now WinSxS can contain multiple copies of the same file if it is used by more than 1 Windows component. The higher the number of components, that many number of times the file exists in C:\Windows\WinSxS. When a Vista update (.MSU) is installed, the components get updated, each and every one, instead of files and the worst part is it still maintains the older backup of the previous versions of components. It does not give the user to not backup the earlier versions like XP's /nobackup switch. As as you install more and more updates on your system, they will take more and more disk space.
The very reason Windows Vista/7 is bloated is because of this servicing mechanism it uses (Component Based Servicing) and because of the DriverStore that stores and stages all drivers (C:\Windows\System32\DriverStore).
Microsoft's ingenious "solution" to this problem of ever growing disk space is to install fewer updates to keep the size of the servicing store under control. Of course, one can't deny installing security updates and leave their system open to security holes so the cost of fixing bugs by installing hotfixes comes at the price of enormous amounts of disk space. The whole servicing stack is more of a downgrade to XP's update.exe method. It causes slow logoff and slow logon (Please wait while Windows configures NONSENSE), heavy disk thrashing upon logon and logoff when updates are installed and systems being unable to boot because of failed updates.
Another huge issue it introduced is the inability to do a true slipstream of service packs and hotfixes. The time it takes to install hotfixes compared to Windows XP is completely unacceptable. First it is searching for whether the update applies to your system for a long time. Then that post-installation process ("Configuring updates... Do not turn off your computer") that takes several minutes before shut down followed by a second post-installation process (configuration) upon restart before logon that also takes also several minutes and thrashes the disk.
The solution is to stay with Windows XP. I can install service pack 3 on my XP is about 10 minutes after downloading it. I can also install a slipstreamed with SP3 and all updates copy of XP is about 30 minutes on a modern fast PC. If you have to use Windows 7or Vista, you will have to be stuck with this slow update non-sense as Microsoft does not even acknowledge that there is any slowdown or loss of functionality. The fact remains: MSU updates are slow as **** and take too much time and as WIndows 7 gets older and MS stops producing service packs, a clean install is going to take longer and longer to bring it up-to-date with all patches installed. Take the case of Vista today. First you have to install Windows Vista, then SP1 which takes about 60-70 minutes, then SP2 and then install all the dozens of post-SP2 SLOW UPDATES. It's not worth wasting your time on an OS whose servicing mechanism Microsoft completely screwed up. I recommend you read more about the servicing and how it works at The Servicing Guy's blog: http://blogs.technet.com/b/joscon/