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What's the risk of updating through windows update?
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If you mean updates in general, that's for a different discussion. If you mean using WU for upgrading to SP3, I don't know that "risk" is the right word as the shear numbers of successful upgrades would suggest the risk is very low. I think the greater risk comes from not having the computer prepared properly
before the upgrade to SP3, regardless how the update is accomplished.
I never have Automatic Updates automatically install anything. If you normally keep your system, and especially your real-time security defenses
current, you don't partake in illegal P2P filesharing and you avoid sites badguys wallow in, it is best to select one of the two notify first options, then listen for fallout from the early adapters to ensure a wayward update from Microsoft, non-standard hooks from ZoneAlarm, or bad images from HP/Compaq do not break something.
I prefer doing it from a file or CD because I can control the process, get it over with and move on. With Windows Update, it can take days for the file to fully download, then days more to fully install. While the upgrade is changing critical system files, the anti-malware programs are watching for changes in critical system files, and the user and other programs are making changes to the system. I don't like that.
Also, understand the computer is most exposed to threats during OS installs and major upgrades. So from a security standpoint, it is best to disconnect from any network, then install the operating system, apply all patches, setup a firewall and anti-malware defenses. Then connect to your local network, and finally the Internet. This is especially important if you cannot be 100% certain all computers on your local network (the "Trusted Zone") are 100% malware free.
And millions of broken computer users make a lot more noise than 100s of millions of happy users who tend to make up the not-so noisy "silent" majority. 
