Firstly I would turn back on Automatic Updates. I was unsure about that option anyway and what you say tells me it wasn't that.
However you have given a good clue. Windows boots up normally and works, but you get this message when Windows loads. It is possible you have deleted, (or uninstalled), something which used svchost.exe, but remnants remain. Perhaps a virus or other malware scan? Or some unwanted application you uninstalled?
Whatever, it might be that this, 'thing' added an entry to the Registry "Run at Startup" section, and if that registry entry wasn't cleared properly it is looking for this item at Startup.
Try this.
Open XP's "System Configuration Editor". Easy to do that, go to Start > Run, type in MSCONFIG and click OK.
In the System Configuration Editor window that displays, go to the Startup tab. Look down the list for anything that seems unusual or unwanted. It may not be obvious so some testing or elimination process may be required, and Google will help you there.
If you find anything, remove the tick, then click Apply/OK. When you next bootup XP will tell you that it has started in selective mode, but that message is easily disabled from within that window itself.
See if that solves this.
Mark
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