You should be running Windows XP SP1. There are no issues between SUS and XP SP1. I'd suggest going back to make sure the AutoUpdate settings are configured correctly on the Windows XP workstations. Also, check to see if the Internet Connection Firewall is enabled, and if so, that the proper ports are open to communicate with the SUS server. Also, verify that ActiveX controls are able to run on the Windows XP computers.
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