Hello Kevind44,
From
http://support.microsoft.com/default.aspx/kb/905474:
"If you obtain the WGA Notifications for Windows XP application through Windows Update or through Microsoft Update, the application will be installed on your computer according to your Automatic Update settings. In some cases, installation will occur at your next logon. During installation, you will be able to review the license terms and you will have the option to decline the update. If you decline the update, the application will not be installed. Upon acceptance of the terms and installation of WGA Notifications, you will receive updates that are specific to the application automatically."
Follow the steps to install the update and when it asks you to accept the EULA, decline it. The software will no longer ask to be installed. Case closed.
For great advice on all topics XP, visit http://www.annoyances.org/exec/forum/winxp