Thanks all for your guidance so far. There are 2 or 3 patches that do not install on the majority of workstations:
MS08-069 WindowsXP-KB954459-x86-ENU.exe
MS08-067 WindowsXP-KB958644-x86-ENU.exe
The isApplicable inventoryrulexml shows constant value = "true" for both so I looked at the pre-reqs/applicability for these and they are Windows XP Pro SP3, which is what we have.
The isInstalled returns a False when I run the xml script on the client, which agrees with the Update Installed = False on the NS resource manager for the client. I also see "update task Enabled" = False in the NS Software Inventory for the client. Does that matter?
I installed RAAD and also tried looking at logviewer but it does not show any lines with Source=SoftwareUpdateAgent. There are a lot of entries with source=CPreReqRuleProvider and CRuleProvider but is not helpful.
Thanks