I have always used Windows Updateto update my drivers including my AC'97 drivers which are VIA Vinyl AC'97 (although the manufacturer of my computer says to use Realtek drivers) I have never ran into a perceivable problem in doing this. I always check Windows Update first, if nothing compatible is found then I check the vendor (unless a problem arises in using the driver from Windows Update, which I can't say ever has).

Infact the reason I always use Windows Update stems majorly from my video card drivers. Windows Update installs the nVidia 45.23 driver which is seriously old, but my video card isn't very new, I have a Geforce 4 Ti 4600... I have in the past installed the most recent nVidia drivers and then tried to play games such as World of Warcraft with them. The game was running pretty much just fine until I installed the drivers, but I decided to see if perhaps newer drivers might help (I always wanted to stay up to date with my drivers) but upon playing the game I noticed all lighting effects were very screwed up looking, so I rolled back to the Windows Update drivers and everything was fine.

That was about 6 months ago and I have also tried again with more recent nVidia drivers and found certain games freeze, or have strange graphical glitches, or restart the computer mid game. Returning to 45.23 seems to resolve these issues. Its starting to make me question the point in keeping my drivers "up to date". It seems to me unless a newer driver resolves a specific issue I am having I might as well use older drivers giving me a sort of "If it ain't broke, don't fix it" mentality and so far the Windows Update drivers seem to be working for me.

Does any one have any input on this? Am I way off? Or does this seem reasonable?

If the most upto date drivers dont work, roll back to the old ones and then wait untill the next latest drivers are released.

I also had a problem with Windows Update and my sound card. Turns out that when Windows updated the sound card drivers, i lost all sound on my system. So i decided to go to the manufacturers website and download from there and everything was fine after that.

I would have to agree with this point.

I have had the same issues with video card drivers, I would say the best thing is to stick with the drivers you are currently using.
In my mind new video cards keep coming out and therefore the drivers that we download relate to your current video card as well as the new cards on the market.
With this in mind when you update it might install stuff which your video card can't handle/support and therefore you have problems.
That is my theory anyway, probably doesn't work like that.

I would just stick with you current drivers, as long as everything works in your games then stay on those drivers.

True about the sound card thing, I've found on both my computers windows update doesn't detect the correct sound card properly, but the drivers it installed worked just fine. I guess there is something strange with its audio device detection, probably should avoid using it for that.