[HKEY_LOCAL_MACHINE\SOFTWARE\Policies\Microsoft\Windows\WindowsUpdate]
"WUServer"="http://susserver"
"WUStatusServer"="http://susserver"

[HKEY_LOCAL_MACHINE\SOFTWARE\Policies\Microsoft\Windows\WindowsUpdate\AU]
"RescheduleWaitTime"=dword:00000001
"NoAutoRebootWithLoggedOnUsers"=dword:00000001
"NoAutoUpdate"=dword:00000000
"AUOptions"=dword:00000004
"ScheduledInstallDay"=dword:00000000
"ScheduledInstallTime"=dword:00000003
"UseWUServer"=dword:00000001

The problem is that sometimes the pop-up and system tray icon advises that there are new updates, whereas other times the message is 'Windows is prepared to begin to install the updates...', with a timeout of 5 minutes to install the updates is displayed.

I prefer the second option but I don't know how to choose between the two. Does anyone know?

From the microsoft.public.softwareupdatesvcs newsgroup
Despite the configuration settings that you have for the Automatic Update client, if the logged on user is an administrator then they will still be notified via the system tray icon that updates are ready to install, and they will get the dialog announcing that the installation is about to occur, with the 5 minute countdown.

Administrators can proactively initiate the install instead of waiting for the scheduled install time, but there isn't a setting or Reg key in SUS itself to prevent those notifications from occurring.