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Automatic Updates are "Greyed Out"

We have eight PC' s all connected to a domain on a server running Server 2008.

We cannot change the defaulted setting of auto updates every day at 03:00AM, the settings are "greyed out",  none of the PC's are getting updates ahtomatically.(the PC's are running XP Professional)

Even if we log into the local machine (and not ask it to join the domain) the settings still cannot be changed.

We have checked "group policy" on local machine and everything looks OK, the server installation of MS Windows server 2008 was using "default" as far as "auto updates" was concerned, no changes were specifically made to them.

Anybody have any ideas why this occurs.?

P.S. when logged in locally to each PC, we are able to go to Microsoft website and install updates from there, but we want this to happen automatically when on the domain.

All sugestions much appreciated, thanks.
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thanks for all your suggestions guys, it certanly gave me a better insight into the issue.

I eventually did a "quick partial fix" by going to Windows SBS console, click on "Security" tab - then "Security Updates" tab, then from "Tasks" menu I chose "Change the Software Update settings" and then in the pop up box I chose "Schedule" , then from the "Client Update Settings" I changed the setting from default od 03:00AM to 12:00PM mid-day to allow updates to run at lunchtime on evryone's PC.
I'll check periodically to make sure this is completing.

Thanks again for all the help.