When you open the Automatic Updates tab in My Computer Property sheet, or from Control Panel, all of the Automatic Updates configuration options may be grayed out. This happens due to any of the following reasons:

1. You're not logged on as Administrator (or equivalent)
2. Automatic Updates Policy is enabled
3. Automatic Updates (and Windows Update) access is blocked via Group Policy

Resolution

To make the Automatic Updates options configurable by the user (only for stand-alone systems), remove the restrictions 2 & 3 above.

For a picture of the location in the registry, click the link

1. Access REGEDIT (The page will open in a separate window)

2. Do the following

   1. Double-click HKEY_LOCAL_MACHINE

   2. Double-click Software

   3. Double-click Policies

   4. Double-click Microsoft

   5. Double-click Windows

   6. Double-click CurrentVersion

   7. Double-click Policies

   8. Double-click WindowsUpdate

3. In the right-pane, delete the value DisableWindowsUpdateAccess

Using the Group Policy Editor - for Windows XP Professional

1. Access Run or Search window

2. Type gpedit.msc

3. Click OK

   1. Double-click Computer Configuration

2. Double-click Administrative Templates

3. Double-click Windows Components

4. Double-click Windows Update

5. In the right-pane, double-click Configure Automatic Updates

6. Set it to Not Configured

4. Then navigate to the following

   1. Double-click User Configuration

2. Double-click Administrative Templates

3. Double-click Windows Components

4. Double-click Windows Update

5. In the right-pane, Double-click Remove access to all Windows Update features 

6. Set to Not configured

More Information

Configure Automatic Updates corresponds to AUOptions registry value. More information on this Policy can be obtained from here

Remove access to all Windows Update features corresponds to DisableWindowsUpdateAccess registry value. Also, when this Policy is enabled, the following errors are shown when accessing the Windows Update, depending upon the way you access the Windows Update page.

Network policy settings prevent you from using Windows Update to download and install updates on your computer. If you believe you have received this message in error, please check with your system administrator.

or

Error Windows Update was disabled by your system administrator.

More information on this policy can be obtained here.