i have been running WSUS for over a year now on the domain controller and have never had a problem with updates not installing correctly, we currently have about 40 PC on the domain all configured to update through GPO from the WSUS server.
Now every time i add a freshly install Wiin XP SP2 PC to the domaiin and then install office 2003 on it it will not install SP3, it comes up failed. when i look in the about section in the help of an office application it shows that no servicepacks have been installed at all. althought the server still shows that the update office SP2 is still required. i have 3 PCs now of completely different hardware but with the same VL of office and windows which are showing this issue.
No other exisiting PC currently on the domain is showing this issue they all have SP3 installed, they have all updated from SP2 fine. i am guessing because the update path is different that is why, but why now is there a problem
it appears you are confusing XP service packs with Office Service packs...