Hopefully, this will save someone else a little time...
While visiting the Windows Update web site with a Windows 98 Second Edition (SE) machine, the error “Software Update Incomplete” kept popping up. I followed the instructions in Microsoft's KB 39585, but that didn't help.
I finally found this article, which describes a similar problem with MSN Messenger..you have to re-register a set of DLL's to reset Windows Update's information:
“regsvr32 softpub.dll Wintrust.dll Initpki.dll Rsaenh.dll Mssip32.dll Cryptdlg.dll”