Automatic Windows Update silently does not update if you have a non-transparent web proxy between you and the Windows Update site. This is because AWU does not take account of any proxy settings which may be required, so it fails to connect to the update server. It doesn't log the failed attempt.

Running 'Windows Update' manually works because it runs within IE, and hence uses IE's proxy settings.

The only workaround I am aware of is to install Software Update Services on a machine which can be accessed without going through a proxy (e.g a server on the local network). SUS allows configuration of proxy settings for its own use.

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