The Windows Update Team have issued a statement today clarifying the whole Windows 'stealth updates' thing:

One question we have been asked is why do we update the client code for Windows Update automatically if the customer did not opt into automatically installing updates without further notice? The answer is simple: any user who chooses to use Windows Update either expected updates to be installed or to at least be notified that updates were available. Had we failed to update the service automatically, users would not have been able to successfully check for updates and, in turn, users would not have had updates installed automatically or received expected notifications. That result would not only fail to meet customer expectations but even worse, that result would lead users to believe that they were secure even though there was no installation and/or notification of upgrades. To avoid creating such a false impression, the Windows Update client is configured to automatically check for updates anytime a system uses the WU service, independent of the selected settings for handling updates (for example, "check for updates but let me choose whether to download or install them"). This has been the case since we introduced the automatic update feature in Windows XP. In fact, WU has auto-updated itself many times in the past.

The point of this explanation is not to suggest that we were as transparent as we could have been; to the contrary, people have told us that we should have been clearer on how Windows Update behaves when it updates itself. This is helpful and important feedback, and we are now looking at the best way to clarify WU's behavior to customers so that they can more clearly understand how WU works. At the same time, however, we wanted to explain the rationale for the product's behavior so our customers know what the service is doing: WU updates itself to make sure it continues to work properly. We are also confident that the choice to use Automatic Updating continues to be the right choice.