Do not choose "Download and install" – you are already offline. The wizard will extract files to a temporary folder and begin the installation.
The 32-bit SP1 offline installer is roughly 537 MB (as opposed to ~1.9 GB for the 64-bit version). That’s modest by today’s standards, but if you have multiple old 32-bit machines (school labs, warehouse terminals), you download once and deploy many times. Windows Update would download the same 500+ MB per machine.
If you are convinced that the offline installer is better, here is the safest way to use it.
Offline installers are less prone to errors caused by fluctuating internet connections during the intensive update process, which can take over two hours on older 32-bit hardware.
You can download the .exe or .iso file once on a modern machine and carry it to multiple PCs via a USB drive.
If you maintain a lab, school, or office with 50 identical 32-bit Windows 7 machines, downloading SP1 once and distributing it via network share or USB is far more efficient than allowing each PC to download 550 MB individually. The offline installer is a force multiplier: one download, 50 installs.
