I don't get any such window.
I open the installer package, enter my password, click continue, agree to the license, select my HD, click upgrade, and it quits.
Software Update works as I described earlier. What confuses me is that SU worked fine last week for the iCal/iSync updates, and I haven't made any changes to my system since then. Even in that case, it doesn't explain why the downloaded package doesn't install either.