After looking until I was blue in the face for phantom DNS/Proxy issues as
related to my internet connection I finally solved this problem by doing the
following:
1. Stopped Automatic Updates service
2. Went to the Windows directory (in my case it was c:\winnt) and renamed
the 'SoftwareDistribution' directory to 'SoftwareDistribution_OLD. I suppose
you could delete it I was just trying to be safe.
3. Restarted Automatic Update service (this creates a new
SoftwareDistribution folder under the windows folder).
Went to "Start" > "Windows Update" and for the first time in months it
worked as designed.
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