Is it necessary to archive ALL of the updates received from Microsoft and Java? Doesn't each subsequent update negate the previous one?

You can delete the old versions. The worst that may happen is that some program still wants to use an old one, at which time you can alter it's configuration to use a newer one (although, in some cases, that may mean making registry changes on your own). This is fairly rare, however, as the installation usually takes care of this.

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