Well, thanks to Dave Sell (etal.) at Microsoft I was able to get the latest service pack for SQL Server 2005 installed. Unfortunately, it took almost a month to get this resolved by some hard-working Microsoft engineers. The error logs were only partially helpful. The web sites we were lead to were not.
To get the update to install, I had to replace the IIS metabase.xml file from one in history. See this link for more information. Apparently, something deleted the file. This prevented IIS Admin Service from starting and also prevented the update from proceeding.
IMHO, it would behoove someone at Microsoft to check the IIS Admin service to make sure it’s running before attempting the update and if it’s not, to report this problem to the user. Of course, this assumes the user is capable of understanding what this error means.
The problem with SQL Server (especially Express) is that it’s installed on a lot of end-user (consumer) systems where the update process must be foolproof and deal with all kinds of interrelated dependencies. Do you know of a single user that could comfortably repair this kind of problem? Why should they? It’s like asking you or I to know how to replace the fuel-injectors on our cars—with a toothbrush.
I had the same problem, Windows Update could not install the SP3 service pack.
I then tried to resolve it by uninstalling SQL Server 2005 and updating to SQL Server 2008.
However, the 2008 version didn't install properly and system restore would not revert it back properly (as a restore point wasn't created for the 2005 uninstall). Even going back 5 restore points didn't help.
So I decided that I probably needed to re-install 2005 to fix the uninstall. I downloaded and installed 2005 SP3 from the Micorsoft site which installed properly and worked correctly.
Therefore: a possible fix is to uninstall SQL Server 2005 and then reinstall using the latest version (SP3).