Yeah, definitely seems to be a 2K3 specific issue. When synchronizing with DynDNS.com, it actually attempts two connections. One to checkip.dyndns.com, and another to dyndns.com to get the host list. The IP Check should always work, even if other things fail.
So it seems like everything can be boiled down to Internet connections - they just don't seem to be working in Windows 2003. The Updater uses WinHTTP to achieve its HTTP connections. Could you try installing this package? I'd like to know the results of the installation, and if anything changed on the Updater afterward.http://support.microsoft.com/kb/842773