Earlier during the week I sorted through this issue and from a clean install succeeded in getting everything back. The discussion or narrative is here.
http://answers.microsoft.com/en-us/windows/forum/windows_xp-windows_update/windows-update-for-xp-fails-with-error-code/9338dea8-f97d-451b-9fc5-19b73935d7ae?page=3&msgId=8e5309f0-a536-49cb-b4a4-837b249f11ab
You need to have XP SP3 and then download the file for offline install of IE8, and the offline install downloads for the cumulative security updates through 2879017, possibly installing 2618444 first and 2870699 second and then 2879017. After 2879017 successfully
installed I went to java dot com and installed the latest java and confirmed java installed and working, then went to Windows Update which cooperated fully and was actually flying through the first 127 downloads and installs and then a second batch of a hundred
more. Windows Update uses java ActiveX so i was just kind of guessing this might work and it worked for me like magic.
The status for automatic updates was ticked enabled as recommended during the clean install and the setting left that way during the manual polling of windows update by clicking on the shortcut link in the start menu, and downloads were coming simultaneously
and showing the awaiting install of downloaded updates with the yellow tray icon so the updates were coming through parallel on both the automatic download and through the open browser to the web page for Windows Update or more correctly Microsoft Update.
http://www.microsoft.com/en-us/download/details.aspx?id=28395
http://www.microsoft.com/en-us/download/details.aspx?id=40069
http://www.microsoft.com/en-us/download/details.aspx?id=40390
http://windows.microsoft.com/en-us/internet-explorer/downloads/ie-8 select language
IE8 English version for 32 bit Windows XP
http://download.microsoft.com/download/0/E/4/0E461168-61B3-4E21-94BA-A9C4D03615F8/IE8-WindowsXP-x86-ETI.exe
You won't be able to get one needed file through the updates and that is
Windows Live Mail 2009 so here is a link for the standalone installer
http://g.live.com/1rewlive3/en/wlsetup-all.exe
Some people have reported problems with BITS found not running after doing a check from Start>Run>services.msc
So here is a fix for that issue, an update to the BITS that will get it running
http://support.microsoft.com/kb/842773/en-us
http://www.microsoft.com/downloads/details.aspx?FamilyId=3FD31F05-D091-49B3-8A80-BF9B83261372&displaylang=en
And this may be helpful also
How do I reset Windows Update Components? Fix it tool.
https://support.microsoft.com/oas/default.aspx?Gprid=8512&st=1&wfxredirect=1&sd=gn&wfxredirect=1