Yeah you're right, I might have missed a step and maybe I didn't notice it.
But what I've done so far (in order):
1. After installing XP and installing VMWare Tools I updated the certifcates using Cert Updater or whatever it's called.
2. Then I upgraded IE to version 8
3. After that, I applied that POSReady .reg file
4. I installed those four updates and they installed successfully (and yes I did restart after installing and all went well)
5. Then I used the Restore_WU_XP_2003 thing and that dreadful Windows File Protection message popped up after that was done, I clicked Cancel on the box then I restarted and that was successful.
6. I opened the IE settings and did the following:
Did the thing that would stop IE from redirecting the Windows Update site infinitely, and yes I did set the Trusted Sites bar to the highest.
Unchecked all of the SSL and TLS options (except TLS 1.2, and yes I did "add" TLS 1.1 and 1.2 prior to this step).
And "Check for server certificate revocation" was already unchecked btw.
7. And then I installed the certificate for ProxHTTPSProxy (and after I tried ProxHTTPSProxy, I installed the one for ProxHTTPS), then I opened ProxHTTPSProxy and called up Windows Update and it errored out right when it checks for updates, and with ProxHTTPS, it errors as well but with a different error code. (And yes I did download the config files made by you I think).
(And fyi, I deleted the VM because I got annoyed eventually, when I get home I'll try again)