We’ve been seeing a lot of Windows Update errors after apply Internet Explorer 7.0 to SBS 2003 servers. Typically the error tells you that you don’t have some of the Microsoft Update sites in your trusted sites. Problem is that when you look these sites are already in there. The quick fix is simply to go into you Internet Browser, then Tools | Internet Options | Security and select the button “Reset all zones to default levels”. If you restart your browser then Windows Update runs normally.
Unsure, whether this affects any browser security issues but really the only browsing on the server should be for Microsoft Updates and should only be done by someone responsible.