I did some research, and turns out that this is often caused either by corrupted files and/or datastores in the Windows Software Distribution folder (which contains the Windows Update history and uninstall files), and the fix involved clearing and then rebuilding those files. You will need either local or domain administrative privileges on the machine to complete these steps.
Note: This folder contains the system’s complete history of installed updates and uninstall files. Following this procedure will remove those files and datastore, and will rebuild them. Only do this if the Windows Update Troubleshooter does not fix the issue, or if there is no other method of fix. In the case study here, this was a new build of Windows 7, and there was no history to preserve.
1. Click Start > type “services.msc” > press enter.
2. Find “Windows Update” in the list, right-click, choose “Stop”. This service must be in the “stopped” state, or the next 2 steps will fail.
3. Open Windows Explorer and navigate to “C:\Windows\SoftwareDistribution”.
4. Delete every file inside the folder. If you receive an error message that some of the files are in use, check to be sure the Windows Update service (step 2.) is stopped.
5. Reboot the computer, and try running Windows Update again.
In a few cases, this procedure didn’t work. In that case, it turns out that some of the .dlls involved with Windows Update were not correctly registered. If this happens to you, here are the steps to correct the issue:
a. Complete steps 1-2 to stop the “Windows Update” service again.
b. Click Start > type “cmd” > right-click and choose “Run as Administrator”.
c. Type the following commands to register the Windows Update
services, pressing the “Enter” key on your keyboard after each one:
d. Reboot the computer immediately and then check for updates once you log back in.