Installing service packs using Windows update is different than downloading the stand alone installers for Service Packs and using these to install a service pack, stand alone installers contain prerequisite updates to install it properly.
There are prerequisite updates required before a service pack can be installed successfully when using Windows Updates, granted windows update does not tell you what they are and just offers all the updates to be installed, not very intelligent.
Windows update has no idea what a user wants, so it does the best job it can to keep the PC secure even if it is more time consuming for you. Windows updates was never designed for clean install of an OS 9 years after it came out.
As far as IE is concerned, not everything is replaced when going from ie6 to 7, or 7 to 8, or 8 to 9, so it needs to update common files to all these versions. also some people do not want to update to the next version of IE and will de-select it from the list, so WU needs to patch the older version, WU has no idea what you will de-select.
What I do when doing a clean install of XP is either download the stand alone service packs from Microsoft and run them manually, or slipstream the service pack into my XP installation CD (this is my preference).
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