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Mine is set to "Check for updates but Let me choose whether to download or install them" that being said you need to be extra careful as MS can be really sneaky.
Installing MS software updates will change your settings back to default or "automatic" (download and apply everything), things like MS Office upgrades or Silverlight just as an example, these changes are done without notifying you implicitly, beware the message "Do you allow this program to make changes to your computer" as it does more than just apply the requested software. It is best to always check your update settings after you see this message.
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