I, too, don't have a problem with a cursor per se here; it could be done w/o one, but it's not a big deal for such a limited number of rows.

You should get away from "sysusers", which is also obsolete, but again that's not a killer issue either.

But, the cursor should be optimized with FAST_FORWARD:

...

declare updateServerroles cursor fast_foward for SELECT name FROM sysusers where name = 'TEST\user'

...

Edit: Corrected typo.