I've had a bit of time to examine some other update issues on this
newsgroup and compare and contrast with what I see on this system.

The first thing I noticed is, the day I installed this system (December
1, 2007) the windowsupdate.log shows an 0x800401f3 error, followed by a
number of identical version mismatch errors, which I assume is a) normal
and b) taken care of by the following update, since they don't appear again.

But later in that same initial session, I start seeing strange
0x80070020 errors like :
2007-12-01 10:44:25:897 1980 8e8 Setup WARNING: Could not
move C:\WINDOWS\SysWow64\wuapi.dll to
C:\WINDOWS\SysWow64\wuapi.dll.wusetup.1728140.bak due to 0x80070020

- which is an error I haven't seen show up or reported on this system
before I went looking for it, but it is found in the newsgroup. None of
the suggestions in the threads helped, though. And the log file seems to
contain a lot of those error types.

The MS support guy didn't ever ask for any of the update log
information, I'm not sure why. If anyone thinks the log may be useful,
I'm happy to provide any requested sections or look for anything in
particular.

I'm starting to think this may be related to an ACL corruption problem,
since I'm also seeing strange problems (as listed earlier) with
"invisible" exe, msc, and cpl files. Most links in my "Administrative
Tools" folder/menu go to the wrong application - so I click on "Computer
Management" and I get the event viewer, and so on. Which sounds like an
underlying process is either screwing with the link files, or there's a
more fundamental integrity issue in the filesystem. But then, why only
msc and exes in the %systemroot% and %windir% folders?

The steps I've taken so far from the start:
1) Downloaded and installed the latest update agent executable and run
it as C:\WindowsUpdateAgent30-x86.exe /wuforce
2) NET stop WuAuServ, rename SoftwareDistribution, net start WuAuServ.
3) All steps in KB316524 (all methods followed in order, from #1 to #6,
without changing the results.
4) at that stage I reinstalled the system after seeing the link
redirection problems, and I tried installing the KB912945 activex plugin
fix to help with the Validation issues, but that was corrupt and caused
some significant system problems. I raised this as a support issue
#SRX1050666314ID, which as yet has not been resolved as far as I can tell.
5) Since then, I've also tried to see if the following articles could
address some or part of the problem:
- KB316524
- KB914226
- KB836948
- KB896224
- KB931852
- KB942967
- KB910359
- KB836941
- KB900936
- KB319585
- KB836930
- KB883280
... and that's all I can find in my history and MS exchanges.

If anyone can help, I'd appreciate it.