Please provide the the exact message you got.
Did you buy this XP at retail? does it have an orange sticker on it with product key?
When you entered the product key, did you make sure your CAPS Lock key was not locked? and that you entered the key correctly?
and during the Activation phase, did it go thru ok ?
I take it that the "error" was while at website for Windows Update. Right?
suggest you review the windows update log file and see what it contains for the last session.
Use Notepad or Wordpad and take a look at (usually C:\WINNT or \Windows )
%windir%\WindowsUpdate.log
Scan down to the bottom. Review contents.
You need to look for entries marked "Error" such as 0x......... (where ....... are numbers)
See KB 902093 How to read the Windowsupdate.log file
http://support.microsoft.com/kb/902093
Also, just to get the Error from update history:
Go back to Windows Update, but then select View update history. (When you first get to website for Microsoft Update-Windows Update, look at left-hand column, under Options. Press "Review your update history".)
If this is on V6 of Windows Update, you should be able to click on that error note (the red X), and see some info.
If you purchase XP at retail, you may contact MS for help and support on this issue. See following link and follow the prompts.
http://support.microsoft.com/common/international.aspx?rdpath=1&gprid=1173