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If you have updates in the Custom folders for ..\Client\Static and ..\Static are these overridden when superseded by MS or WOU, or are they installed regardless?

No, they won't be removed. wsusou will try to install them.

[edit]
behaviour on Windows 8 / 8.1: I don't have a machine to test, but I think it will behave the same way as Win 7
behaviour on Windows 7: it just installs files, which are newer. It won't overwrite newer files. The old ones will just be copied into winsxs.
behaviour on Windows Vista: I don't have a machine to test, but I think it will behave the same way as Win 7
behaviour on Windows XP: all files will be overwritten (tested with an IE8 security update and an IE8 compatibility view update)
[/edit]

I thought as much.

Since superseded updates are not needed I should remove them from the custom downloads. Is it a simple case of looking the a superseded file and remove those numbers from my lists?

You can take a look at .\exclude\ExcludeList-superseded.txt. But this will only list he superseded security updates.
For the rest you have to take a look at Microsoft's support page.
http://support.microsoft.com/kb/<kb-number>

I could create a version of ListMissingUpdateIds.vbs, which lists all Updates for the currently running OS & uses Windows Update instead of wsusscn2.cab.

oh that would be useful, there is no point downloading update if they are not used.

however there is no rush, I will look through .\exclude\ExcludeList-superseded.txt.

When I look through this file there was still updates for Windows 2000. Is this generated from wsusscn2.cab?

It is generated from wsusscn2.cab. And the catalog file still includes Windows 2000.