Well, first of all let me just say that I am not a computer professional. However, I have had the same problem with my 32-Bit Windows Vista Home Premium (making Microsoft's statement null and void) and I have solved it! Here are the step by step instructions:
1) Go to the Start Menu.
2) Click on Computer.
3) Open up the drive where windows is installed (usually your C drive).
4) Open the Windows Folder.
5) Scroll down a bit and locate the SoftwareDistribution folder (exactly like that).
6) Open the Download folder.
7) Open the Install folder.
8) There sould only be one file there. Right click on it and select "Run as Administrator".
9) After entering an Administrator password, run the installation, using the default values and clicking yes at the license.
10) After the installation is complete (shouldn't take more than a few minutes), restart your computer (as an added precaution, though not necessary).
11) After the computer restarts again, run Windows Update again. It should run as normal. All fixed!
I apologize for Microsoft's ineptitude.
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