I was unable to upgrade WindowsXP to SP3, given an access denied error. It was not hard to find a relevant kb article from Microsoft:
kb949377: When you try to install Windows XP Service Pack, you receive the error message “Access is denied” or “Service Pack installation did not complete”
The only given solution that worked was to reset the registry and the file permissions (as given in the kb article):
cd /d "%ProgramFiles%\Windows Resource Kits\Tools" subinacl /subkeyreg HKEY_LOCAL_MACHINE /grant=administrators=f /grant=system=f subinacl /subkeyreg HKEY_CURRENT_USER /grant=administrators=f /grant=system=f subinacl /subkeyreg HKEY_CLASSES_ROOT /grant=administrators=f /grant=system=f subinacl /subdirectories %SystemDrive% /grant=administrators=f /grant=system=f subinacl /subdirectories %windir%\*.* /grant=administrators=f /grant=system=f secedit /configure /cfg %windir%\repair\secsetup.inf /db secsetup.sdb /verbose