|"How good is the Windows Firewall? I've read some people say it is all that they use."|
It's okay, but many don't like it because it is not as easy to customize it's configuration as other Firewalls are. If you aren't going anywhere or downloading anything dangerous, it's fine for many people, even with it's default settings.
" When I have Zone Alarm set as the firewall, I can't access Windows Update. When I turn it off I can."
That fact tells you something. Either Zone Alarm's default settings don't allow Update to do what it normally does, or there is a known problem with using Zone Alarm with the firewall enabled and running Microsoft Update that Zone Alarm and/or Microsoft know about.
If you don't mind disabling Zone Alarm's Firewall before running Microsoft Update, do that. It is extremely unlikely your Zone Alarm Firewall being off would allow something to happen while downloading or installing the updates. If you are leery about that you could enable the Microsoft Firewall (it is much more likely to be compatible with Update) while running Update with Zone Alarm's Firewall disabled, but personally I turn that off too when using Update.
"Do you have any suggestions on an alternate firewall?"
As I have said I used Tiny Personal Firewall, but the version I used was primitive in comparison to other and/or newer ones, and initially you have to decide what to allow access and what not to for many program files - newer firewalls have a lot of that already configured when you start them up.
I don't know if Tiny Personal Firewall has been updated since. It had a feature that was unique at the time for a free firewall - it can be set to check whether a file/program that is accessing the system is authentic, especially useful for malware that renames itself the same as a file that is normally found in Windows.
The free Microsoft anti-adware/anti-trojan
application (it's name escapes me at the moment)has many built in firewall settings related to malware, and it doesn't seem to interfere with Update.
The free AdAware Personal Edition (or whatever - a similar name) has many built in firewall settings related to malware, but it runs only when you execute it/run a scan. On the other hand, it can't interfere with anything when it's not running.
The free SpyBot Search and Destroy (or whatever) has many built in firewall settings related to malware, but it runs all the time by default, and I found it difficult to turn off when you don't want it running.
Other than that, I haven't tried other firewalls.
"Is it possible that by doing all of the updates that the problem that Zone Alarm has now will be corrected?"
Possibly but I wouldn't count on it. An update to Zone Alarm if available is more likely to help but don't count on it.