If you dont want WGA, then you cant use windows update (but you can still get critical updates via auto-update, which microsoft has stated they wont prevent).
They are now forcing WGA for autoupdaters too. You can no longer download automatic updates without receiving WGA as your next update. You can download updates after that even if your pc doesn't pass the test, but you will have nags telling you that your OS isn't 'genuine'. I know quite a few people running pirated versions of XP that have had a problem with this recently. Most rolling back to Win2k or moving to linux because of it. (I guess the nags are working?)
Without WGA installed there are no more updates for any XP users.
My past experiences about a year ago with blocking certain Microsoft IP's has resulted in some odd things...mainly related to receiving updates.
In order to download updates from the Windows Update site, you can't block a specific server that it will do a time check with. You will get an error about your clock being wrong and Windows Update will refuse to work properly.
I thought this was kind of odd, but when I unblocked all Microsoft IP's Windows Update site began working properly again.
I tried to unblock them one at a time to find the right combo but that only fixed the problem temporarily, as they keep changing the server they use for the time check. I had to unblock them all eventually.
I can be the paranoid type sometimes and didn't think my OS needed to phone home without me knowing about it or agreeing to it or knowing what for.
I have come across a few things in the past to justify this blocking behavior. Namely the spyware that used to be included with MSN Messenger that they at first claimed wasn't part of their product, that would reinstall itself every time you ran MSN if you tried to disable it. They have since removed this from MSN. (do some research on the history of the mysterious loadqm.exe)
Also there have been some reports/rumors about the WMF exploit being something deliberately written into the WMF specifications by Microsoft in case they ever needed to use it as a backdoor to force install anything they needed/wanted to on a user's pc...by just displaying a graphic on their site...or as an ad on another site....or by other means of getting you to view the graphic.
The fact that some 9x versions of windows are affected by this and Microsoft refuses to issue an update to fix it before the end of life & end of updates this month kind of bothers me. We have been waiting since January for an official fix. Do they have some nasty stuff planned for 9x users to get them to upgrade against their will? Or are they just being lazy? Or by not patching it, do they think older machines will suddenly be able to run a newer version of windows and they can make some more money? I don't know but I am patched against the problem on my WinME machine despite their lack of fix for it.
Now about IP's....Your IP is like the house number on your front door. Just knowing it doesn't give someone a way in. And hiding it is like trying to take the numbers off your door in order to hide your house. It's silly and can have some negative results. Imagine doing that in real life and then ordering a pizza or calling a taxi.
Everything you do online is tied to your IP. Without it you get no web pages...no antivirus updates, nothing. All servers you connect to from the time you log in online till the time you go offline will get your IP...and even more info...like what operating system you use...or what browser you are using and the version of it. If you don't like it, the only solution is to pull the plug on your connection and not have an IP.
There are the paranoid types that think knowing someone's IP means they can crack into your computer. It's not as simple as that. It would be like saying that your house can get robbed if you put a number on the front door and keep the place securely locked but by removing it and leaving the front door unlocked it will somehow save you from being robbed. (It's not the house number that is the problem here.)
But everyday I saw people in my chatroom that were very paranoid about others knowing their IP. We openly displayed it when you entered the room for the purposes of being able to block gross misbehavers and identify impersonators of people we know....and to be able to report peddlers of child pornography to the proper authorities (yes we have seen a few of these in the room)
I have also seen some idiots trying to scare people with the "I got your IP" line, perpetuating that kind of paranoia. So much that I started displaying mine as part of my username in the room just to prove a point. I think quite a few of my admins did too to prove the same point. (one of the guys in the room displayed 127.0.0.1 as part of his username for many years as a joke about us doing it, even after we stopped). We all did notice one strange effect by displaying our IP's so openly...we all got fewer port scans showing up in our firewall logs.