I cleared the WindowsUpdate.log on one of the machines and made SCE 2010 "Detect Software and Updates Now" and examined the log.
I see an exception being thrown:
Cannot open database "SUSDB" requested by the login. The login failed. Login failed for user 'NT AUTHORITY\NETWORK SERVICE'. in several places.
The full log is shown below. (server name masked to F.Q.D.N)
2009-11-19 13:43:02:963 940 12b4 Misc =========== Logging initialized (build: 7.4.7600.226, tz: -0000) ===========
2009-11-19 13:43:02:963 940 12b4 Misc = Process: C:\Windows\system32\svchost.exe
2009-11-19 13:43:02:963 940 12b4 Misc = Module: c:\windows\system32\wuaueng.dll
2009-11-19 13:43:02:963 940 12b4 Service *************
2009-11-19 13:43:02:963 940 12b4 Service ** START ** Service: Service startup
2009-11-19 13:43:02:963 940 12b4 Service *********
2009-11-19 13:43:02:965 940 12b4 Agent * WU client version 7.4.7600.226
2009-11-19 13:43:02:965 940 12b4 Agent * Base directory: C:\Windows\SoftwareDistribution
2009-11-19 13:43:02:966 940 12b4 Agent * Access type: No proxy
2009-11-19 13:43:02:966 940 12b4 Agent * Network state: Connected
2009-11-19 13:43:23:449 940 e24 Report CWERReporter::Init succeeded
2009-11-19 13:43:23:449 940 e24 Agent *********** Agent: Initializing Windows Update Agent ***********
2009-11-19 13:43:23:449 940 e24 Agent *********** Agent: Initializing global settings cache ***********
2009-11-19 13:43:23:449 940 e24 Agent * WSUS server: https://F.Q.D.N:8531
2009-11-19 13:43:23:449 940 e24 Agent * WSUS status server: https://F.Q.D.N:8531
2009-11-19 13:43:23:449 940 e24 Agent * Target group: (Unassigned Computers)
2009-11-19 13:43:23:449 940 e24 Agent * Windows Update access disabled: No
2009-11-19 13:43:23:450 940 e24 DnldMgr Download manager restoring 0 downloads
2009-11-19 13:43:23:451 940 e24 AU ########### AU: Initializing Automatic Updates ###########
2009-11-19 13:43:23:452 940 e24 AU # WSUS server: https://F.Q.D.N:8531
2009-11-19 13:43:23:452 940 e24 AU # Detection frequency: 22
2009-11-19 13:43:23:452 940 e24 AU # Approval type: Scheduled (Policy)
2009-11-19 13:43:23:452 940 e24 AU # Scheduled install day/time: Every day at 3:00
2009-11-19 13:43:23:452 940 e24 AU # Auto-install minor updates: Yes (User preference)
2009-11-19 13:43:23:452 940 e24 AU # Will interact with non-admins (Non-admins are elevated (User preference))
2009-11-19 13:43:23:452 940 e24 AU Setting AU scheduled install time to 2009-11-20 03:00:00
2009-11-19 13:43:23:520 940 12b4 Report *********** Report: Initializing static reporting data ***********
2009-11-19 13:43:23:520 940 12b4 Report * OS Version = 6.1.7600.0.0.197008
2009-11-19 13:43:23:520 940 12b4 Report * OS Product Type = 0x00000008
2009-11-19 13:43:23:529 940 12b4 Report * Computer Brand = Dell Inc.
2009-11-19 13:43:23:530 940 12b4 Report * Computer Model = PowerEdge R900
2009-11-19 13:43:23:532 940 12b4 Report * Bios Revision = 1.1.10
2009-11-19 13:43:23:532 940 12b4 Report * Bios Name = Phoenix ROM BIOS PLUS Version 1.10 1.1.10
2009-11-19 13:43:23:532 940 12b4 Report * Bios Release Date = 2008-11-14T00:00:00
2009-11-19 13:43:23:532 940 12b4 Report * Locale ID = 2057
2009-11-19 13:43:23:534 940 e24 AU Successfully wrote event for AU health state:0
2009-11-19 13:43:23:534 940 e24 AU Initializing featured updates
2009-11-19 13:43:23:534 940 e24 AU Found 0 cached featured updates
2009-11-19 13:43:23:534 940 e24 AU Successfully wrote event for AU health state:0
2009-11-19 13:43:23:536 940 e24 AU Successfully wrote event for AU health state:0
2009-11-19 13:43:23:536 940 e24 AU AU finished delayed initialization
2009-11-19 13:43:23:536 940 e24 AU Triggering AU detection through DetectNow API
2009-11-19 13:43:23:536 940 e24 AU Triggering Online detection (non-interactive)
2009-11-19 13:43:23:537 940 12b4 AU #############
2009-11-19 13:43:23:537 940 12b4 AU ## START ## AU: Search for updates
2009-11-19 13:43:23:537 940 12b4 AU #########
2009-11-19 13:43:23:539 940 12b4 AU <<## SUBMITTED ## AU: Search for updates [CallId = {7F649BDC-5F7E-4195-9837-9A9691F54342}]
2009-11-19 13:43:23:557 940 4e4 Report Uploading 2 events using cached cookie, reporting URL = https://F.Q.D.N:8531/ReportingWebService/ReportingWebService.asmx
2009-11-19 13:43:26:147 940 4e4 PT WARNING: ReportEventBatch failure, error = 0x8024400E, soap client error = 7, soap error code = 400, HTTP status code = 200
2009-11-19 13:43:26:148 940 4e4 PT WARNING: SOAP Fault: 0x000190
2009-11-19 13:43:26:148 940 4e4 PT WARNING: faultstring:Server was unable to process request. ---> The type initializer for 'Microsoft.UpdateServices.Internal.Reporting.WebService' threw an exception. ---> Cannot open database "SUSDB" requested by the login. The login failed.
Login failed for user 'NT AUTHORITY\NETWORK SERVICE'.
2009-11-19 13:43:26:148 940 4e4 PT WARNING: ErrorCode:(null)(0)
2009-11-19 13:43:26:148 940 4e4 PT WARNING: Message:(null)
2009-11-19 13:43:26:148 940 4e4 PT WARNING: Method:(null)
2009-11-19 13:43:26:148 940 4e4 PT WARNING: ID:(null)
2009-11-19 13:43:26:148 940 4e4 Report WARNING: Reporter failed to upload events with hr = 8024400e.
2009-11-19 13:43:26:163 940 4e4 Report Uploading 2 events using cached cookie, reporting URL = https://F.Q.D.N:8531/ReportingWebService/ReportingWebService.asmx
2009-11-19 13:43:26:168 940 4e4 PT WARNING: ReportEventBatch failure, error = 0x8024400E, soap client error = 7, soap error code = 400, HTTP status code = 200
2009-11-19 13:43:26:168 940 4e4 PT WARNING: SOAP Fault: 0x000190
2009-11-19 13:43:26:168 940 4e4 PT WARNING: faultstring:Server was unable to process request. ---> The type initializer for 'Microsoft.UpdateServices.Internal.Reporting.WebService' threw an exception. ---> Cannot open database "SUSDB" requested by the login. The login failed.
Login failed for user 'NT AUTHORITY\NETWORK SERVICE'.
2009-11-19 13:43:26:168 940 4e4 PT WARNING: ErrorCode:(null)(0)
2009-11-19 13:43:26:168 940 4e4 PT WARNING: Message:(null)
2009-11-19 13:43:26:168 940 4e4 PT WARNING: Method:(null)
2009-11-19 13:43:26:168 940 4e4 PT WARNING: ID:(null)
2009-11-19 13:43:26:168 940 4e4 Report WARNING: Reporter failed to upload events with hr = 8024400e.
2009-11-19 13:43:26:168 940 4e4 Agent *************
2009-11-19 13:43:26:168 940 4e4 Agent ** START ** Agent: Finding updates [CallerId = AutomaticUpdates]
2009-11-19 13:43:26:168 940 4e4 Agent *********
2009-11-19 13:43:26:168 940 4e4 Agent * Online = Yes; Ignore download priority = No
2009-11-19 13:43:26:168 940 4e4 Agent * Criteria = "IsInstalled=0 and DeploymentAction='Installation' or IsPresent=1 and DeploymentAction='Uninstallation' or IsInstalled=1 and DeploymentAction='Installation' and RebootRequired=1 or IsInstalled=0 and DeploymentAction='Uninstallation' and RebootRequired=1"
2009-11-19 13:43:26:168 940 4e4 Agent * ServiceID = {3DA21691-E39D-4DA6-8A4B-B43877BCB1B7} Managed
2009-11-19 13:43:26:168 940 4e4 Agent * Search Scope = {Machine}
2009-11-19 13:43:26:168 940 4e4 Setup Checking for agent SelfUpdate
2009-11-19 13:43:26:168 940 4e4 Setup Client version: Core: 7.4.7600.226 Aux: 7.4.7600.226
2009-11-19 13:43:26:168 940 4e4 Misc Validating signature for C:\Windows\SoftwareDistribution\SelfUpdate\wuident.cab:
2009-11-19 13:43:26:172 940 4e4 Misc Microsoft signed: Yes
2009-11-19 13:43:26:175 940 4e4 Misc Validating signature for C:\Windows\SoftwareDistribution\SelfUpdate\wuident.cab:
2009-11-19 13:43:26:178 940 4e4 Misc Microsoft signed: Yes
2009-11-19 13:43:26:180 940 4e4 Misc Validating signature for C:\Windows\SoftwareDistribution\SelfUpdate\wsus3setup.cab:
2009-11-19 13:43:26:184 940 4e4 Misc Microsoft signed: Yes
2009-11-19 13:43:26:187 940 4e4 Misc Validating signature for C:\Windows\SoftwareDistribution\SelfUpdate\wsus3setup.cab:
2009-11-19 13:43:26:190 940 4e4 Misc Microsoft signed: Yes
2009-11-19 13:43:26:204 940 4e4 Setup Determining whether a new setup handler needs to be downloaded
2009-11-19 13:43:26:204 940 4e4 Misc Validating signature for C:\Windows\SoftwareDistribution\SelfUpdate\Handler\WuSetupV.exe:
2009-11-19 13:43:26:209 940 4e4 Misc Microsoft signed: Yes
2009-11-19 13:43:26:209 940 4e4 Setup SelfUpdate handler update NOT required: Current version: 7.4.7600.226, required version: 7.4.7600.226
2009-11-19 13:43:26:209 940 4e4 Setup Evaluating applicability of setup package "WUClient-SelfUpdate-ActiveX~31bf3856ad364e35~amd64~~7.4.7600.226"
2009-11-19 13:43:26:220 940 4e4 Setup Setup package "WUClient-SelfUpdate-ActiveX~31bf3856ad364e35~amd64~~7.4.7600.226" is already installed.
2009-11-19 13:43:26:221 940 4e4 Setup Evaluating applicability of setup package "WUClient-SelfUpdate-Aux-TopLevel~31bf3856ad364e35~amd64~~7.4.7600.226"
2009-11-19 13:43:26:339 940 4e4 Setup Setup package "WUClient-SelfUpdate-Aux-TopLevel~31bf3856ad364e35~amd64~~7.4.7600.226" is already installed.
2009-11-19 13:43:26:340 940 4e4 Setup Evaluating applicability of setup package "WUClient-SelfUpdate-Core-TopLevel~31bf3856ad364e35~amd64~~7.4.7600.226"
2009-11-19 13:43:26:514 940 4e4 Setup Setup package "WUClient-SelfUpdate-Core-TopLevel~31bf3856ad364e35~amd64~~7.4.7600.226" is already installed.
2009-11-19 13:43:26:515 940 4e4 Setup SelfUpdate check completed. SelfUpdate is NOT required.
2009-11-19 13:43:26:752 940 4e4 PT +++++++++++ PT: Synchronizing server updates +++++++++++
2009-11-19 13:43:26:752 940 4e4 PT + ServiceId = {3DA21691-E39D-4DA6-8A4B-B43877BCB1B7}, Server URL = https://F.Q.D.N:8531/ClientWebService/client.asmx
2009-11-19 13:43:27:737 940 4e4 PT +++++++++++ PT: Synchronizing extended update info +++++++++++
2009-11-19 13:43:27:737 940 4e4 PT + ServiceId = {3DA21691-E39D-4DA6-8A4B-B43877BCB1B7}, Server URL = https://F.Q.D.N:8531/ClientWebService/client.asmx
2009-11-19 13:43:27:898 940 4e4 Agent * Found 0 updates and 49 categories in search; evaluated appl. rules of 494 out of 641 deployed entities
2009-11-19 13:43:27:899 940 4e4 Agent *********
2009-11-19 13:43:27:899 940 4e4 Agent ** END ** Agent: Finding updates [CallerId = AutomaticUpdates]
2009-11-19 13:43:27:899 940 4e4 Agent *************
2009-11-19 13:43:27:903 940 4e4 Report REPORT EVENT: {BBC9A0ED-0540-4524-BA6E-25389BC79EE6} 2009-11-19 13:43:23:535-0000 1 202 102 {00000000-0000-0000-0000-000000000000} 0 0 AutomaticUpdates Success Content Install Reboot completed.
2009-11-19 13:43:27:903 940 4e4 Report REPORT EVENT: {099DC8FF-AF64-44B6-9B0F-96AFB9D600E7} 2009-11-19 13:43:27:898-0000 1 147 101 {00000000-0000-0000-0000-000000000000} 0 0 AutomaticUpdates Success Software Synchronization Windows Update Client successfully detected 0 updates.
2009-11-19 13:43:27:903 940 1124 AU >>## RESUMED ## AU: Search for updates [CallId = {7F649BDC-5F7E-4195-9837-9A9691F54342}]
2009-11-19 13:43:27:903 940 1124 AU # 0 updates detected
2009-11-19 13:43:27:904 940 1124 AU #########
2009-11-19 13:43:27:904 940 1124 AU ## END ## AU: Search for updates [CallId = {7F649BDC-5F7E-4195-9837-9A9691F54342}]
2009-11-19 13:43:27:904 940 1124 AU #############
2009-11-19 13:43:27:904 940 1124 AU Successfully wrote event for AU health state:0
2009-11-19 13:43:27:904 940 1124 AU Featured notifications is disabled.
2009-11-19 13:43:27:904 940 1124 AU AU setting next detection timeout to 2009-11-20 11:27:04
2009-11-19 13:43:27:904 940 1124 AU Setting AU scheduled install time to 2009-11-20 03:00:00
2009-11-19 13:43:27:904 940 1124 AU Successfully wrote event for AU health state:0
2009-11-19 13:43:27:905 940 1124 AU Successfully wrote event for AU health state:0
2009-11-19 13:43:27:908 940 4e4 Report CWERReporter finishing event handling. (00000000)
2009-11-19 13:43:27:908 940 4e4 Inv #############
2009-11-19 13:43:27:908 940 4e4 Inv ## START ## Inv: Inventory Collection
2009-11-19 13:43:27:908 940 4e4 Inv #########
2009-11-19 13:43:27:908 940 4e4 Inv # Talking to WSUS server = https://F.Q.D.N:8531
2009-11-19 13:43:27:909 940 4e4 Inv # Downloading Rule file from = https://F.Q.D.N:8531/Inventory/InventoryRules.cab
2009-11-19 13:43:27:912 940 4e4 Misc Validating signature for C:\Windows\SoftwareDistribution\Inventory\InventoryRule\InventoryRules.cab:
2009-11-19 13:43:27:915 940 4e4 Misc Microsoft signed: Yes
2009-11-19 13:43:27:918 940 4e4 Inv # Inventory Rule id = 8226C3A1-70D4-4848-B441-1555AC820A23, version = 1.0
2009-11-19 13:43:33:144 940 4e4 PT WARNING: ReportInventory failure, error = 0x8024400E, soap client error = 7, soap error code = 400, HTTP status code = 200
2009-11-19 13:43:33:144 940 4e4 PT WARNING: SOAP Fault: 0x000190
2009-11-19 13:43:33:144 940 4e4 PT WARNING: faultstring:Server was unable to process request. ---> The type initializer for 'Microsoft.UpdateServices.Internal.Reporting.WebService' threw an exception. ---> Cannot open database "SUSDB" requested by the login. The login failed.
Login failed for user 'NT AUTHORITY\NETWORK SERVICE'.
2009-11-19 13:43:33:144 940 4e4 PT WARNING: ErrorCode:(null)(0)
2009-11-19 13:43:33:144 940 4e4 PT WARNING: Message:(null)
2009-11-19 13:43:33:144 940 4e4 PT WARNING: Method:(null)
2009-11-19 13:43:33:144 940 4e4 PT WARNING: ID:(null)
2009-11-19 13:43:33:167 940 4e4 PT WARNING: ReportInventory failure, error = 0x8024400E, soap client error = 7, soap error code = 400, HTTP status code = 200
2009-11-19 13:43:33:167 940 4e4 PT WARNING: SOAP Fault: 0x000190
2009-11-19 13:43:33:167 940 4e4 PT WARNING: faultstring:Server was unable to process request. ---> The type initializer for 'Microsoft.UpdateServices.Internal.Reporting.WebService' threw an exception. ---> Cannot open database "SUSDB" requested by the login. The login failed.
Login failed for user 'NT AUTHORITY\NETWORK SERVICE'.
2009-11-19 13:43:33:167 940 4e4 PT WARNING: ErrorCode:(null)(0)
2009-11-19 13:43:33:167 940 4e4 PT WARNING: Message:(null)
2009-11-19 13:43:33:167 940 4e4 PT WARNING: Method:(null)
2009-11-19 13:43:33:167 940 4e4 PT WARNING: ID:(null)
2009-11-19 13:43:33:189 940 4e4 PT WARNING: ReportInventory failure, error = 0x8024400E, soap client error = 7, soap error code = 400, HTTP status code = 200
2009-11-19 13:43:33:189 940 4e4 PT WARNING: SOAP Fault: 0x000190
2009-11-19 13:43:33:189 940 4e4 PT WARNING: faultstring:Server was unable to process request. ---> The type initializer for 'Microsoft.UpdateServices.Internal.Reporting.WebService' threw an exception. ---> Cannot open database "SUSDB" requested by the login. The login failed.
Login failed for user 'NT AUTHORITY\NETWORK SERVICE'.
2009-11-19 13:43:33:189 940 4e4 PT WARNING: ErrorCode:(null)(0)
2009-11-19 13:43:33:189 940 4e4 PT WARNING: Message:(null)
2009-11-19 13:43:33:189 940 4e4 PT WARNING: Method:(null)
2009-11-19 13:43:33:189 940 4e4 PT WARNING: ID:(null)
2009-11-19 13:43:33:189 940 4e4 Inv WARNING: Inventory: Failed to upload inventory result with error 0x8024400e
2009-11-19 13:43:33:190 940 4e4 Inv # WARNING: Exit code = 0x8024400E
2009-11-19 13:43:33:190 940 4e4 Inv #########
2009-11-19 13:43:33:190 940 4e4 Inv ## END ## Inv: Inventory Collection
2009-11-19 13:43:33:190 940 4e4 Inv #############
2009-11-19 13:43:33:190 940 4e4 Inv WARNING: Inventory: Failed to process work item 0x8024400e
2009-11-19 13:43:33:191 940 4e4 Report REPORT EVENT: {6AAC06D0-8C86-4F9B-8592-FD454365F79A} 2009-11-19 13:43:27:899-0000 1 156 101 {00000000-0000-0000-0000-000000000000} 0 0 AutomaticUpdates Success Pre-Deployment Check Reporting client status.
2009-11-19 13:43:33:191 940 4e4 Report CWERReporter finishing event handling. (00000000)
2009-11-19 13:43:38:189 940 4e4 Report REPORT EVENT: {416E2D01-9166-418B-ACBC-2D7620DD3E7E} 2009-11-19 13:43:33:189-0000 1 124 104 {00000000-0000-0000-0000-000000000000} 0 8024400e InventoryEngine Failure Inventory Result Upload Inventory: Faied to upload result data
2009-11-19 13:43:38:208 940 4e4 Report CWERReporter::HandleEvents - WER report upload completed with status 0x8
2009-11-19 13:43:38:208 940 4e4 Report WER Report sent: 7.4.7600.226 0x8024400e 00000000-0000-0000-0000-000000000000 Other 104 Managed
2009-11-19 13:43:38:208 940 4e4 Report CWERReporter finishing event handling. (00000000)