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Hi there,
This is mostly a note to myself, but if other can benefit from it I'm glad.
I've had this problem since the release of SP1 for Visual Studio 2005, when doing a Windows Update it always failed to install.
This even happens if it's a clean install of win2k3 with sql 2k5 on top of it.
This hotfix solves the problem, and after a reboot you will be able to install sp1 for vs 2005.