I've recently encountered a couple computers either running Win XP Home SP1 or Win XP Pro SP2 which would give a response of "Failed" on each attempt to download further updates from Microsoft Update Website, even when the automatic updates service was running.
Here's what I did to fix it:

At a command prompt:
1) First stop the update service by typing "net stop wuauserv"
2) Type "cd %windir%\softwaredistribution\datastore"
This folder is supposed to be first created when SP2 is installed but I've seen it on older SP1 only computers.
3) Now delete the datastore file by typing "del datastore.edb"
4) Lastly, restart the automatic updates service, by typing "net start wuauserv"

This might not work for those of us who literally turn off most services in an attempt to streamline our OS, (hint: MS Updates requires more than the simple Automatic update services to be running).

If you don't know how to turn off services and you have the "failed" problem, try my suggestion.

ZT3000
Beta tester of "0"s and "1's"