Recently my pc has been acting up whenever I try to install windows updates or any other software.

With Windows updates, SP1 for Windows Office 2007 sintalled no problem since all this started happening, but the Malicious software removal tool and SP3 wont install, they try over and over but after they download it it says it is now installing but the status bar doesnt move, and I have tried letting it sit for hours a few times now.

I also tried to Install AVG and get a similar problem, the exe file doesnt seem to show up and then everything kind of freezes, the pc still runs but when I minimize a window it doesn't go away etc. and covers the desktop. - I tried installing AVG in safe mode, though apparantly it's not possible in safe mode, though it at least started to work partially through the install.

I also tried installing another program I use frequently and the same thing occurred,
I used system restore and still have the same problems, so I am out of ideas and REALLY don't want to have to do a clean OS install yet again.

Ok, how long's this been happening, can you remember if what you installed, do you get a 'not responding' error, are you on SP2, you can find the last thing out by pressing start, then right clicking 'My computer' then Properties. If you're on SP 3 Open a Command Prompt window (Start -> All Programs -> Accessories -> Command Prompt) and type the command: regsvr32 wups2.dll and check that you get an affirmative response. If not, use Dial-a-fix. If you're not sure what an option does, hover over it for a description. Actually, try it anyway even if you’re on SP2.

Jay2 Thanks, I am running SP2 -= I tried the command you suggested and get:
"dllRegisterServer in Wups2.dll succeeded."

Should I still try Dial-a-fix?

This has been happening for about a week, I get not responding errors when everything freezes up and I try to shut down from explorer, and I think it was svchost as well, though I cant recall, I will keep note of it next time it happens.

Suggest you to download and install this program (it's free) CCleaner ... Alternative Download.
After installing...run the program...click on Analyzer...then click on Run Cleaner.
On the left side of the window, click on Registry...click on Scan for issues...click on Fix selected issues.

This program will cleanup your temp files which could be interferring with the installation of programs.

go for CCleaner.

Ok, I downloaded CCleaner but had the same issues installing that. I was only able to install it and run it in safe mode, but when rebooting to normal mode,
and trying to start up CCleaner, the application does not start at all nor does it show in the task manager.

In the Safe mode, suggest you try this...

Place the XP Windows Install CD in the CD drive.
Go to the Accessories...Command Prompt
enter: sfc /scannow
There is a space between "c" and "/".
This could take from minutes to hours to run.