You want to block Windows Update because:
Your internal policy does not allow each single host to go direct to the internet for Windows Update
Windows Update is done through Patch Management Server, so the client host is not allowed to go direct to the internet for Windows Update.
When Windows Updates are being blocked in the ProxySG, users may receive a message that resembles one of the following:
We couldn't get online to download your updates. We'll try again later, or you can check now. If it still doesn't work, make sure you're connected to the Internet.
Windows could not search for new updates: An error occurred while checking for new updates for your computer. Try again
Install the following CPL to block currently known Microsoft Update servers at the proxy level. This CPL also blocks the user-agent for Windows Update (the known user-agent as of this writing).
<proxy>
; client.address=<IP_address> Condition=Windows_Update ALLOW
; enable previous rule to allow specific host to perform Windows Update
Condition=Windows_Update DENY
define condition Windows_Update
url.domain=windowsupdate.com
url.domain=c.microsoft.com
url.domain=update.microsoft.com
url.domain=windowsupdate.microsoft.com
url.domain=download.windowsupdate.com
url.domain=ntservicepack.microsoft.com
url.domain=wustat.windows.com
url.domain=login.live.com ;(this is required if you have connected a Microsoft Account)
url.domain=mp.microsoft.com
url.domain=download.microsoft.com
request.header.User-Agent="Microsoft-CryptoAPI"
request.header.User-Agent="Windows-Update-Agent"
end
Microsoft may change these URLs. Please refer this article for the latest published list. You may need to add/remove domains to the above CPL accordingly.