Symptom
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:

You're not logged on as Administrator (or equivalent)

Automatic Updates Policy is enabled

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.

Click Start, Run and type REGEDIT.EXE

Navigate to this location:

HKEY_LOCAL_MACHINE \ SOFTWARE \ Policies \ Microsoft \ Windows \ WindowsUpdate \ AU

In the right-pane, delete the two values AUOptions and NoAutoUpdate

Navigate to this location:

HKEY_CURRENT_USER \ SOFTWARE \ Microsoft \ Windows \ CurrentVersion \ Policies \ WindowsUpdate

In the right-pane, delete the value DisableWindowsUpdateAccess

Using the Group Policy Editor - for Windows XP Professional

Click Start, Run and type gpedit.msc

Navigate to the following location:

=> Computer Configuration
==> Administrative Templates
===> Windows Components
====> Windows Update

In the right-pane, double-click Configure Automatic Updates and set it to Not Configured

Then, navigate to this location:

=> User Configuration
==> Administrative Templates
===> Windows Components
====> Windows Update

In the right-pane, set Remove access to all Windows Update features to Not Configured