Everyone, it's in the EULA that ships with every update package, and also you can find this in the Windows Update Terms of Service link as well - you are not allowed to redistribute updates from Windows Update or Microsoft, nor are you allowed to make any money from them:
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DESCRIPTION OF SERVICES.
Through its network of Web properties, Microsoft provides you with access to a variety of resources, including developer tools, download areas, communication forums and product information (collectively "Services"). The Services, including any updates, enhancements, new features, and/or the addition of any new Web properties, are subject to the TOU.
PERSONAL AND NON-COMMERCIAL USE LIMITATION.
Unless otherwise specified, the Services are for your personal and non-commercial use. You may not modify, copy, distribute, transmit, display, perform, reproduce, publish, license, create derivative works from, transfer, or sell any information, software, products or services obtained from the Services.
And, if you install an update, you agree to the terms of the update's EULA:
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NOTICE SPECIFIC TO SOFTWARE AVAILABLE ON THIS WEB SITE.
Any software that is made available to download from the Services ("Software") is the copyrighted work of Microsoft and/or its suppliers. Use of the Software is governed by the terms of the end user license agreement, if any, which accompanies or is included with the Software ("License Agreement"). An end user will be unable to install any Software that is accompanied by or includes a License Agreement, unless he or she first agrees to the License Agreement terms.
The Software is made available for download solely for use by end users according to the License Agreement. Any reproduction or redistribution of the Software not in accordance with the License Agreement is expressly prohibited by law, and may result in severe civil and criminal penalties. Violators will be prosecuted to the maximum extent possible.
WITHOUT LIMITING THE FOREGOING, COPYING OR REPRODUCTION OF THE SOFTWARE TO ANY OTHER SERVER OR LOCATION FOR FURTHER REPRODUCTION OR REDISTRIBUTION IS EXPRESSLY PROHIBITED, UNLESS SUCH REPRODUCTION OR REDISTRIBUTION IS EXPRESSLY PERMITTED BY THE LICENSE AGREEMENT ACCOMPANYING SUCH SOFTWARE.
They also sold CDs and DVDs of the autopatcher discs, which violates the EULA as well.