If you receive Windows Update error 6d9e while installing SQL Server 2005 Service Pack 3 using Windows Update, it means that the installation folders or directories are compressed or encrypted.
To correct the problem, make sure the folder locations where you are installing the service pack to aren't compressed or encrypted, or specify a different folder, and then run Windows Update again.
So, remove the compression from the DATA directory and execute set up again.
Remove the compression from the folder C:\Program Files\Microsoft SQL Server and see if you are able to install the updates without any problem.
Check the links below for more details:
Windows Update error 6d9e
http://windows.microsoft.com/en-IE/windows-vista/Windows-Update-error-6D9E
SQL Server 2005 and 2008 Setup Failures (Compressed DATA Directory)