If you're running 10.2.1, it might seem that Software Update is broken. I ran it to install "Security Update 2002-09-20" (1.0), it seemed to work fine and installed it, and it reports in the log 'Installed "Security Update 2002-09-20" (1.0)'. But if I run Software Update again, it will find the Security Update again and say it's not installed. You can repeat this over and over.
So how do you fix this? A simple restart fixed it on my machine. After the reboot, Software Update correctly saw that the package had been installed.
[Editor's note: I had the same problem on my machine, and somehow fixed it without a reboot, but I have no idea what I might have done...]
Mac OS X Hints
http://hints.macworld.com/article.php?story=20020924054919768