The "term" used to include updates into a product is called
slip-streaming...

So, for example, when windows SP2 came out, you could take a existing
windows install...and slip-stream into this install the SP2 updates. This
new resulting install would then have sp2 included..and you would not need a
separate install. (and the resulting install was not really much different
in size then the original).

It is perhaps possible that the sp2 can be slipstreamed into the runtime
install. I would also like to do this, and have been simply too busy to
research further on how to do this. Anther way around this is to not include
the sp2 update..and let windows update do this for you (I *think* this
works - but, that is not your question). as it stands now, I simply don't
include sp2 with my runtime...

I not seen the instructions around on how to do this, but there is likely a
way....

http://www.broadbandreports.com/faq/msoftapptips/6.3+Additional+Tips+and+Tricks#3867

The above for example gives instructions on how to slip stream sp2 into a
office xp install
the result is a sp2 office xp install (but, again, we are talking about
office 2003) -- it also not clear if this would work for the runtime.

It seems to me, that simply un-packing all of the runtime files into a
directory...running the sp update (as above)..and re-building the cab file
with the updated files would do the trick....  I not done this, nor looked
into even attempting this.