Hi,
Based on my research, please try the following:
1. Run this Microsoft Fixit and see how it works.
Fix the problem with Microsoft Windows Update that is not working
http://support.microsoft.com/mats/windows_update/
2. Test the issue again in Clean Boot Mode.
3. Run
System Update Readiness Tool and try again.
4. Manually download Windows 7 SP1 Standalone Installer and install it in Clean Boot Mode.
For 64-bit Windows 7, please download windows6.1-KB976932-X64.exe.
More information:
Learn how to install Windows 7 Service Pack 1 (SP1)
Hope this helps.
Jeremy Wu
TechNet Community Support
