All good advice above. A decent firewall, and competent virus protection are essential these days. There are several good, free ones about.
I use ZoneAlarm and AVG Free, and they have never failed me. Norton did (badly) and the Windows Firewall only stops stuff coming in - if it sees it. The harvester bots that send your e-mail address book to their spamming masters seem to go straight through the XP firewall.
Windows updates these days are mostly plugging the odd hole here and there in the colander, and adding a bit more MS spyware to your computer (like the infamous "Windows Genuine Advantage", which is the opposite of what its name says).