I installed IE 8 with the updates it came with the installer and still no go. Its weird because It would keep hanging on search for updates. Left it on over night and downloaded them. it took an entire day and all it found was 106 MB of total of updates. Tried install and it would hang and wouldnt go anywhere. Then Restarted and got an error for trying to install again...
wsusoffline.net download, and run. Select XP, choose the updates you want/need, and let it download all the installers.
Copy the whole WSUSoffline folder to your XP machine.
Run wsusoffline client on XP machine.
It will require a few restarts, and re-running of the wsusoffline client, but it will bring the installation up to date, and allow windows update to function normally.
I did this on a couple of XP clean installs this week (yes XP!! I know waiting on final Windows 7 builds and application testing to be completed for these so we can ditch XP), and it worked fine.