OK, I think I've got it solved............
When I booted up the computer today, a window popped up saying there were updates waiting to be installed - 59 of them in fact! - so after installing them and restarting, I went back to Windows Update, and SP2 downloaded with no problems. I guess I had to have all those other updates in there first or something...........anyway, appreciate all the suggestions!
As to the IE 7 question, I've been running it on all three of my computers (home desktop and laptop and work PC) with absolutely no problems. I was using Firefox at some of you guy's recommendation, but when IE 7 came out with tabbed browsing like Firefox, I went back. There are a few site I visit that just didn't work right with Firefox, don't know why...............