There is an offline installer for SP1. You can find it at Download details: Windows 7 and Windows Server 2008 R2 Service Pack 1 (KB976932)
. You can click on "Continue" then go ahead and choose the 32-bit executable. If SP1 caused the issue, you might want to try System Restore to before SP1 was installed as when you install SP1 (provided System Restore is enabled), it creates a restore point before its actual installation.