So, you bought an old, used iMac. Sounds like whoever you bought it from may have done an erase/reinstall from the Snow Leopard DVD, which would leave you with 10.6.3.
When you turned it on the first time, did it take you through a system setup process? Did you create a new user login account? Were you able to login and use the Mac before you ran Software Update?
Have you tried restarting the Mac (hold the power button until it restarts)?
You may need the OS X install DVD in order to fix things - do you have it?