In which directory Windows XP stores updates?

what are you actually referring to here? There are a few things I can think of that you are reffering to:

1) uninstallers for the updates that have already been installed

2) the actual files installed by the updates

3) the already downloaded but not yet installed update files

in the windows folder the updates are installed, and the uninstall files are also there. I think the folder is called ProductUpdates or something.

-gosh

C:\Windows\Installer

this is where the actual MSI and MSP files are copied,

C:\Windows\SoftwareDistribution

packages that are copied down by WSUS or automatic updates reside here

In the C:\WINDOWS\SoftwareDistribution directory it exists another directories, which are with updates already with download concluded?