my wife's MBP iTunes wants to upgrade to 7.1.1, it asks if we want to d/l now, we say yes, then software update starts. it says there is new software available but there's nothing in the software update list! and 'install' is greyed out.
Manually download and install the iTunes 7.1.1 update here. After that's done, delete the folder called com.apple.SoftwareUpdate in /Library/Caches (the initial / means the root of Macintosh HD, or whatever your primary disk is called). That should make Software Update work normally the next time an update comes.
Once it has finished an update for something it then automatically checks again for any newer versions than it has just installed. This is because some updates need to be incrementally updated i.e. 1.1 > 1.2 > 1.3 and cannot skip updates. So if you were on 1.1 and 1.3 was available you would only see 1.2 update it and think it was the latest version when infact it is not.
When it runs this check again and does not find anything it still says 'new software available' but everything is greyed out because infact there is no new software available. Maybe Apple missed something in 10.4.8 as I noticed this happening since upgrading to it.