Gpupdate not updating policy
This policy applies to Group Policies for computers, users, and domain controllers." This setting gives the same result you are seeing when you run GPUPDATE Good call Data Bitz.
This was the setting in my GPO that was causing problems.
Computers running Windows XP with SP2 implement both the Prohibit use of Internet Connection Firewall on your DNS domain network setting and the new Windows Firewall settings in the following way: If the Prohibit use of Internet Connection Firewall on your DNS domain network setting is enabled and there are no changes to the default values of the new Windows Firewall settings, then Windows Firewall is disabled when connected to the network from which the Group Policy object was obtained.
If this setting is enabled, GPUPDATE will not work and it appears that GPO computer policies will not take affect until the computer is rebooted twice.Reboot a 2nd time - gpupdate /target:user - completes - gpupdate /target:computer - completes - Firewall settings updated 3.Add back problem GPO and reboot - gpupdate /target:user - times out - gpupdate /target:computer - completes 4.Sets the number of seconds to wait for policy processing to finish. Examples include user-targeted Software Installation and Folder Redirection. Causes a logoff after the Group Policy settings have been refreshed, which is required for those client-side extensions that do not process policy on a background refresh cycle but do process it when a user logs on.