You receive error message 0x80070003 when you try to update Windows
from the Windows Update Web site
http://support.microsoft.com/?kbid=836949

When you attempt to update Windows XP from the Windows Update Web site,
you receive error 0x80070003?
http://www.jsiinc.com/SUBQ/tip8000/rh8024.htm

If the above doesn't fix your problem, try this as well:

If the directory "%ALLUSERSPROFILE%\Application Data\Microsoft\Network"
does not exist, you will get this error.

%ALLUSERSPROFILE% is normally "C:\Documents and Settings\All Users"

To verify existence/create this folder, you can do like this:

Press Start/Run, and fill in this:

"%ALLUSERSPROFILE%\Application Data\Microsoft"

Press OK, and the Microsoft folder will open.

If no Network folder is found there, create it (File\New --> Folder).

--
torgeir, Microsoft MVP Scripting and WMI, Porsgrunn Norway
Administration scripting examples and an ONLINE version of
the 1328 page Scripting Guide:
http://www.microsoft.com/technet/scriptcenter/default.mspx