edit: IE remembers/stores the last directory that was selected for a download.
open a http://www.sevenforums.com/tutorials/947-command-prompt.html window and copy/paste this... REG QUERY "HKCU\Software\Microsoft\Internet Explorer" /v "Download Directory"
...and then press enter.
Your folder/directory will be different since you mentioned that the download folder is empty... unless you have something removing each downloaded file.
As Nuttawet is using IE8 in Win 7, something seems "wrong with Windows Updates" imho.
Nuttawet, can you post screen prints of your Windows Update windows for:
1 - Windows Update (updates available)
2 - Windows Update > Change settings
3 - Windows Update > View update history
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