Hmmm, no problems here. I've installed W2K on 3 different machines and then updated eventually to SP4, and it was a breeze.
Celeron 300Mhz (god knows what mobo)
PIII 800Mhz (CUV4X-M)
PIII 1Ghz (CUV4X-E)
It could be that your W2K setup got corrupted in the past and now the SP4 update gets confused when it reaches some strange file. I'd backup everything and reinstall W2K from scratch and right away update to SP4, then restore my backed-up files.
