Windows 7: Configuring Updates Fails

My sons laptop
is currently stuck at the screen "Configuring updates: Stage 3 of 3 - 0% complete. Do not turn off your computer."
It has been like this over that last several hours or so. It keeps rebooting to the same screen like its in a loop.
I have turned it off and tried safe mode but it goes back to the same screen. Ran the diagnostics that came with the laptop and everything passed, no problems noted.
I have the reinstallation dvd for this laptop.
What do I need to do to attempt recovery of the OS and will any data he has be kept or will it be lost?
His computer is a Dell Inspiron 1525, 3 GB RAM, Windows Vista Home Premium, SP1 (maybe SP2), 32 bit.

Try it a few more times. Only, once it gets stuck, just reboot it. Wait just a little bit when it does that...like maybe 3-5 minutes. Eventually it will stop trying and load to original without the update.

Just booted it up again, same screen. I'll let it reboot several more times and see if anything happens. Will let you know.

In the last 15 minutes, the laptop has rebooted 4 times and has not gone beyond the "configuring updates" screen. The light for the HD is blinking indicating HD activity. Thats it so far.

The update is not installed successfully, you receive a message, and the computer restarts when you try to install an update in Windows Vista and Windows 7

Whats my next option? I would like to be able to get his system restored to before the updates. However, since I cannot get past the configure updates screen, this might not happen. Not sure if using the Dell reinstallation disk will do a complete install (deleting all files on the HD) or if it can reinstall just the OS and leave everything else. Haven't actually put the disk in the drive yet, don't want to lose everything yet. Have to find out first what my son has on it besides a lot of music.

It won't delete anything. It will make a folder called Windows.old and place everything in there.

Just don't do any formatting and you'll be cool. Install Windows to where it is now.

I've seen this folder with Windows 7, didn't know that Vista did it also.
I will go ahead and give it a shot as soon as my son gets home from work shortly.
Thanks for all you assistance

Got it working. The reinstall disk had a restore option and I was able to restore his computer to an earlier date. Now I just need to get him to clean up some of the crap he has on his computer (has 33GB free out of 136GB).
Thanks again for your time and input.

You're welcome. You can install the failed update manually according to Microsoft and you will not run into the issue again, if attempted this way. See the link I posted.

Enjoy.

Near bottom:

"How to avoid this problem

To avoid this problem, obtain and install update 937287 from the Microsoft Download Center separately from all other updates on the Windows Update site. Install the update that applies to your version of Windows Vista so that you can successfully install future updates."

Just substitute KB version with the one that was causing problems on 7. You can find out by looking at Windows Update history.