This particular server has the following software installed: Sharepoint Portal Server 2003, Windows SharePoint Services 2.0, Project Server 2003 and Windows Server Update Services (WSUS) 3.0 Beta 2. Checking the Eventlog's, I found the following error:

Event Type: Error
Event Source: Windows Server Update Services
Event Category: Clients
Event ID: 13042
Date: 4/12/2007
Time: 9:08:45 AM
User: N/A
Computer: SERVER01
Description:
Self-update is not working.

For more information, see Help and Support Center at http://go.microsoft.com/fwlink/events.asp.



The solution for me was simple and found in a comment at the following site, http://msmvps.com/blogs/athif/pages/67954.aspx:

If you're running SharePoint on port 80 on the same server then you'll need to exclude the /SelfUpdate path from its control:

C:\Program Files\Common Files\Microsoft Shared\Web Server Extensions\60\BIN\stsadm -o addpath -url http://127.0.0.1/SelfUpdate -type exclusion

After running this command and restarting the Update Services (WsusService), I was (nearly) home free. I also had to change a couple permissions for the SelfUpdate directory through Explorer and IIS.

Directory permissions for c:\Program Files\Update Services\Selfupdate are as follows:

Group	Permissions
Administrators	Full Control
System	Full Control
Domain/Users or Local/Users	Read&Execute, Read, List Folders
IUSR_ComputerName	Read&Execute, Read, List Folders