Vista - SP2 installation failure

Hi all, I just registered to post on here.

Today I tried upgrading my Vista Business 32bit to Service Pack 2 through Windows Update. Vista is totally up to date, apart from SP2.

The update goes well but when I get to the logon screen and enter my password, I get a blank screen with the hourglass cursor for about 2 seconds and then it goes straight back to the logon screen. It loops like that forever - I restarted and shut the system down several times but the error consistently reappears. As my system was unusable, I reverted to the restore point Windows Update created (thank godness) before installing SP2. I had to boot from my Vista installation DVD and go to 'repair your computer' and did it like that.

I re-downloaded SP2 and bingo, the exact same error happens again, except this time I disabled the password, just in case, but it made no difference. I'm only able to write this because I restored the system back again.

I use an administrator account, never have any problems, Vista usually works fine for me. I'm virus and spyware free, AVG is up to date, spybot too, everything works very fast, only Firefox crashes often but it's no big deal. I close down everything before doing the updates: avg, spybot, msn, sidebar, EA downloader, skype. The system tray just has the time, network and battery icons.

My laptop is a Dell Vostro 1700, Vista Business 32bit, 2 gig ram, 8600m GT, Core 2 Duo T7500 2.2 ghz.

The only problem I've ever had was with SP1 a couple years ago, my system died after SP1 but it turned out my hard drive was broken, so I replaced it.

Anyone with suggestions, I'm all ears.

Update BIOS and drivers for everything.Uninstall all security applications.See also How to troubleshoot Windows Vista and Windows Server 2008 service pack installation issues

So, I tried microsoft's own troubleshooting guide but it didn't get me anywhere. In fact, after so many failed updates and system restores, eventually system restore stopped working properly and my system was unstable, so I reinstalled the whole damn thing from scratch. I didn't want to flash my bios because I'm a noob. I'm on SP2 now, it works fine.