Windows 7: Windows Update doesn't work after OEM System Restore

New Acer Aspire, but I pitched the box, so can't return it. Anyway, It initially worked fine for about a week, including Windows Update. Got to a point where every window would say (Not Responding) and resources were maxed out. I couldn't isolate the problem and didn't have any valuable info on the laptop yet. So I did a complete System Restore back to OEM spec.
I tether to my cellphone for internet. So I installed drivers and Access Manager for that. I go into Windows Update and click to check for updates. It runs for about 20 seconds then disconnects from the internet and pops up an error code. I've gone through all the steps that can be run down there.
SP1 is not installed yet.
I'm at a loss here and need help, I'm not tech/nerd savvy, but I'm not computer shy either.

Try downloading SP1 from here:
http://www.sevenforums.com/windows-u...ful-links.html

SP1 installed successfully. Problem still exists. It throws error code 8024402C. No aftermarket firewall, anti-virus or malware software installed right now. Windows Update troubleshooter fixes something, supposedly. But still don't work.

tried running Malwarebytes in safe mode and it didn't find anything.

error code 8024402C
Windows Update error 8024402C

That didn't help.
"Programs that might do this include firewalls, anti-spyware software, web accelerators, Internet security or antivirus programs. and proxy servers."
None of that is on this computer. Can't turn off what's not there.

Have you tried Microsoft for Windows Update support?

Support for Microsoft Update technical problems - troubleshooting

I'm waiting for them. I discovered something though. If I goto Microsoft.com, my computer drops internet connection. In fact, just noticed that if i click on this thread link in my email, my computer drops connection. It didn't used to do that, but now there's a bunch of Microsoft links on this thread.
I've even tried turning off Windows Firewall, to no avail.

BTW, If I try to download something from CNET...I have no problems. Just Microsoft!

Also, I ran msconfig and disabled all Startup items and all non-microsoft Services. didn't help.

With your system connected to the same internet connection that it's failing to update from, please open a Command Prompt and check the proxy setting

To open a Command Prompt click the Start orb
In the Search programs and files field type in cmd
Under Programs click on cmd.exe

At the prompt type in netsh winhttp show proxy
press Enter

If no proxy is involved, you'll see this

Current WinHTTP proxy settings:

Direct access (no proxy server).

If a proxy is listed, you will need to type in exit and press Enter to close the Command Prompt.

Then open an Elevated Command Prompt in order to remove the proxy.

To do that, after you enter cmd in the Search programs and files field , right click cmd.exe and choose 'Run as administrator', then agree to the UAC prompt.

At the Elevated Command Prompt, type in the following, then press Enter

netsh winhttp reset proxy

You will receive a message that the proxy has been reset.

If a proxy server is not causing the updating issue, then please try one more attempt at updating.
When/if it still fails, close Windows Update.

Copy and paste the last 50 to 75 lines of the WindowsUpdate.log into your reply so we may be able to see where the connection to the server issue is stemming from, please - How to read the Windowsupdate.log file