EDIT: Problem solved.




I have the Windows Automatic Update feature turned off. Every couple of weeks I manually update and install only critical and what I deem as necessary for my machine updates. Everything went fine the end of October, updates successfully installed. I also installed the English language pack as my OS was in German. I don't think the language pack has anything to do with the problems I'm about to describe. In early November I went to do a manual update and got this screen:





OK, it's telling me that I need to update the updater. No big deal there. But, it's also telling me that I NEVER checked for updates and updates were NEVER installed. Not true, according to the next window I've got 112 updates in installed:





Anyways, I continue to update the updater. It then tells me it can't complete the job and says to restart the computer and try to update again, which I did:





So, during the restart I get the message "Do not shut the computer down, update in progress" or something similar. Then while rebooting it shows the same message with a % status of completion. When the desktop appeared and everything settled down, I go to do a manual update again, and here's where the sh*t hits the fan. Check this window out:




So I do a System Restore to get back where I was before the updater update. Things were back to normal. I tried to update a few more times but always got the results shown above. So I did one more System Restore to get back to normal and stay there. Things went well until a couple of days ago when during a boot up I get the message "Do not shut the computer down, update in progress" or something similar with a % status of completion. I didn't download anything to install! I got suspicious and went to do a Windows Update and got this window:





So what can I do now to get the updater to work properly? Any and all help will be greatly appreciated. Thanks.

I hope this Tutorial might be of some help:
System Files - SFC Command

when i installed SP2 for vista on my machine, it gave me the "windows is not genuine" watermark at the bottom right hand of the screen and made my desktop background black.

I got this fixed by getting help from a microsoft representative through Easy Assist (remote assistance program for microsoft technical support). All they did was reload the Software Licensing and Distribution service code and i could then reactivate windows by putting my key in again

LONG STORY SHORT: its most likely a service corruption with update.

I think you're right there Flavius, I just changed back to the original language (German) and the dialogue windows seem to be in order again. They went from this:





To this:



So the language pack was the issue the whole time. Strange that it only interferreed with the WU dialogue boxes, I didn't have these problems with any other programs. Let's call this one solved. Many thanks.