Right - easy answer.
As you're here, I assume you can use another computer, with good internet and CD writer. Download Ubuntu live CD. Booting a live CD takes a few minutes longer than booting from hard drive, but it gives you a working desktop with full office suite pre-installed.
Later on, you can waste time trying to fix XP - and then I would make some space - maybe 10GB - and install ubuntu, so that if ever XP failed (Heaven Forbid I suggest such a thing!) then you have a very reliable backup system.
I did this, the trouble is... I never use Windows any more.
I installed a Virtualbox in ubuntu, and installed XP in there, so the few softwares I really MUST run with Windows can still run on my desktop, but my desktop has no antivirus, no antispyware..... no 'START' menu :P it's nice.
If you install, you will have a choice of ubuntu/suse/PCliinux or Windows when you boot.
Microsoft has a newsgroup dedicated to windows update issues. One thing you might try is re-registering the dll's associated windows update. Here's a link to the MS newsgroup. Oh, if you type in the error that you are receiving in Microsoft's web site, you'll probably get decent help on it.