UPDATE: followed instructions, and computer is now up to date (thanks for the help)
However, Dxdiag still shows the wrong versions and has a yellow /!\ next to a few files when its running in 32-bit mode

These files are ddraw.dll, d3d8thk.dll, dinput8.dll, dimap.dll, pid.dll, dsound3d.dll, dsdmo.dll, dsdmoprp.dll - problem does not exist when running in 64-bit mode.
Can edit for screenshot if needed.
Not sure what the yellow /!\ means, (guessing it means 'wrong version'). I checked file versions in syswow and system32
system32: ver 5.3.3790.1830 Size: 421 KB (431,104 bytes)
syswow64: ver 5.3.3790.1830 Size: 276 KB (283,136 bytes)
Any help with this problem ? :(
EDIT: Comes up with dialog - DirectX Diagnostic Tool:
DxDiag has detected that there may have been problem acessing the system information the last time this program was used. Would you like to bypass the system information this time?
EDIT:: Got DxDiag to save what was going on to help
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System Information
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Time of this report: 3/18/2008, 16:43:10
Machine name: CRISPX
Operating System: Windows XP Professional x64 Edition (5.2, Build 3790) Service Pack 2 (3790.srv03_sp2_gdr.070321-2337)
Language: English (Regional Setting: English)
System Manufacturer: System manufacturer
System Model: System Product Name
BIOS: Default System BIOS
Processor: AMD Athlon(tm) 64 X2 Dual Core Processor 4200+ (2 CPUs), ~2.2GHz
Memory: 2046MB RAM
Page File: 1033MB used, 2932MB available
Windows Dir: D:\WINDOWS
DirectX Version: DirectX 8.1 (4.08.0001.0810)
DX Setup Parameters: Not found
DxDiag Version: 5.03.3790.3959 32bit Unicode
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DxDiag Notes
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DirectX Files Tab: Several files (ddraw.dll, d3d8thk.dll, dinput8.dll, etc.) are old versions, which could cause problems.
Display Tab 1: No problems found.
Sound Tab 1: No problems found.
Music Tab: No problems found.
Input Tab: No problems found.
Network Tab: The registry information for the service provider 'DirectPlay8 Modem Service Provider' is missing or damaged. You should reinstall DirectX. The registry information for the service provider 'DirectPlay8 Serial Service Provider' is missing or damaged. You should reinstall DirectX. The registry information for the service provider 'DirectPlay8 IPX Service Provider' is missing or damaged. You should reinstall DirectX. The registry information for the service provider 'DirectPlay8 TCP/IP Service Provider' is missing or damaged. You should reinstall DirectX. Problems were found in the system registry. Details are available in the saved text file.
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DirectX Debug Levels
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Direct3D: 0/4 (n/a)
DirectDraw: 0/4 (retail)
DirectInput: 0/5 (n/a)
DirectMusic: 0/5 (n/a)
DirectPlay: 0/9 (retail)
DirectSound: 0/5 (retail)
DirectShow: 0/6 (retail)
Next Post will Show what 64-bit shows