I have Office 2008 running perfectly on my computer, and just recently downloaded the two upgrades from the MS website for SP1 12.1.0 and then the latest update for 12.1.3. However, when I install 12.1.0, every time I try to open an MS application, it pops up with the setup assistant, asks me to register, closes, asks to check for updates, and then quits. It won't let any programs run. If I do a fresh install of Office 2008, it works again. The minute I upgrade, it stops.
I had a problem installing 12.1.3 yesterday and had to completely uninstall MS Office before it would successfully install. I would suggest calling MS Support, they will coach you on the correct way to fully uninstall Office 2008 and then assist on how to install it so the update works. It took me about 40 minutes on the phone yesterday but it was solved. The phone number I used was (866) 474-4882.