Tried this article, http://support.microsoft.com/kb/949377
Ran the batch file suggested in that article twice and Disabled Spysweeper and Symantec Antivirus but it still won't update. I tried updating SP3 and SP2 with that same Access denied error. Tried different profiles too.
Here is an error I get after trying to install the SP
Windows XP Service Pack 2 installation failed, leaving Windows XP partially updated.
Service Pack 2 installation did not complete.