You have already found out for yourself, but deleting the downloads and redownloading never helps, because Apup will simply download exactly the same files as last time.
If you suspect a corrupted download, the remedy is always to run Apup a second time. If the first downloads are corrupted in some way, then Apup automatically detects that and redownloads only the files that have been corrupted.
If Service Pack 3 for Office 2003 is not properly installed, that would certainly be the cause of these problems, since AutoPatcher checks that you have Service Pack 3 installed before offering the updates.
If Service Pack 3 asked for the original CD, that is because the Local Installation Source (LIS)* has been deleted or was not saved at initial installation. It is possible to eliminate the LIS, in order to save room on the HDD, but it is usually a waste of time, since it leads to exactly this problem. The LIS for Office 2003 is about 300MB.
The whole point of the LIS is that you then do not need the CD in order to install updates.
Microsoft said:
Setup creates a local installation source in a hidden folder on each user’s computer. Windows Installer uses the local installation source to install Office, and the local installation source remains available so users can repair Office, install new features, and apply patches without being prompted for a CD.
(* Note: I think you mean Local Installation Source (LIS), not SKU -- SKU means something else. In this case SKU=12.)
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