This happens iwith XP mode too. I was trying to install / update it, to make an up to date XP ISO.
I noticed svchost.exe was 100% constantly. I couldnt update it, without it freezing. The only thing that was installed was XP mode / with XP3.
Tried WSUS offline. it was fine but didnt update everything. Well, I couldnt figure out how to make it update everything. Even tho, I downloaded all the updates with it. And created an ISO with it
Altho, I dont know what happened after I installed XP mode. Not only would it not update, but later I found out that the BITS and Auto update services were borked (one / or both were corrupt somehow, or some files didnt register properly / files were missing). In the end, I gave up trying. It just took too long for it to do anything