USAFRet :
Open Windows Explorer. See what drive letters are there, and what is on them.
I know what they are. I'm not stupid. I just found out how to fix the problem. I had to edit something in the registry. My problem is fixed. I don't know who you take me for. I stated above exactly what was wrong and you're trying to make me look like I'm an idiot. The solution I found was on the Microsoft website, someone had posted about having a similar problem with a Mac Boot Camp, except his problem was slightly different, but I tried the suggestion that someone gave him and it worked for me.
Link to it:
http://answers.microsoft.com/en-us/windows/forum/windows_other-windows_update/xp-error-not-enough-drive-space-cant-install/1519eefa-b767-486f-9920-76b2e5c3792f
My problem was that I couldn't do updates because I didn't have IE8 and SP3, but I couldn't install SP3 because of what I stated in my first post, and so I found that post on Microsoft and it fixed my problem.
Here's what Santosh Y on Microsoft said to do to fix it:
a. Click Start, click Run, type “regedit” (without quotes) and then click OK.
b. Locate and then click the following registry subkey:
HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\Windows\CurrentVersion\Setup
c. On the Edit menu, point to New, and click String Value.
d. In the text box under the Name column, type "BootDir" (without quotes) and press ENTER.
e. Right-click the name BootDir, and then, click Modify.
f. In the Edit String Value dialog box, type the drive letter for your system drive, and then click OK.
For example, if your system drive is C: then, type "C:\" (without quotes).
g. Close Registry Editor and restart the computer.
h. Install Windows XP Service Pack 3 that you downloaded.
Except that I didn't need to create a new BootDir (it wouldn't let me anyway since one already existed). All I needed to do was change the drive letter from C to F.