Hello,
Unfortunately svchost.exe is used for many different purposes by Windows and taskmanager on windows XP does not give you enough details to properly troubleshoot what is actually causing the high CPU usage.
It's better to use process explorer, which is also from Microsoft nowadays, as it gives you a bit more detail.
Start it, check out the svchost process that is causing high CPU, then look at the Command line column.
In there you will see something like:
C:\Windows\system32\svchost.exe -k LocalService
The part after svchost.exe (in this example "-k LocalService") is the interesting bit.
--
Wil
Turn off Automatic Windows Updates and then see how things perform. You can then turn it back on and see if it doesn't chew up CPU cycles. Come April 2014 there are no more Windows XP Updates anyway! 
Yes, useful screenshot. The wuaclt child process under the svchost is indeed the windows update part.
Glad to hear you found the cause.
Coincidentally I had a windows XP VM last week showing the same problem It did eventually update, but took a very very long time.
If you use that VM to connect to the internet then I would certainly still try to keep it up to date until april 2014.
After april 2014 my suggestion is to uninstall the network adapter from the VM and use a supported windows VM for any internet related things if you have a need for windows.
You could still use host file sharing if you want to continue using the VM after that time and have a need to get files in/out, but use with care. Remember that without internet it also doesn't have an up-to-date anti virus.
--
Wil