Windows 7: How to repair the windows update service

I'd been struggling with my system freezing up and occasionally throwing the BSOD. The system would boot and run fine for about 2 minutes then it would act like it was being overtaxed, taking 30 seconds or more to respond to screen input. This is a i7 (64bit) processor with 4Gb of RAM and Process Explorer showed no appreciative activity. After hours of safemode tests removing and restoring countless third party services I found a informational error in the event log stating that the Windows Modules Installer had problems starting. So I disabled the WMI service and my system stopped freezing up ran just fine; however now windows Updates won't install. Obviously there is something wrong with the Windows installation subsystem; how do I repair this? I am running Windows 7 Pro

Here's the Services console Description of Windows Modules Installer (TrustedInstaller)
" Enables installation, modification, and removal of Windows updates and optional components. If this service is disabled, install or uninstall of Windows updates might fail for this computer. "

It should actually state " ... will fail for this computer " as TrustedInstaller is the Owner of all of the system files and if it's Disabled no updates will install.

With the WMI service still Disabled, open Windows Update in Control Panel.
Click the Change settings link in the left frame.
Click the drop down window under Important updates and set it to " Never check for updates (not recommended)"
Click OK and agree to the UAC prompt.

Now go back to the WMI service and set it's Startup type: to Manual.
How is the system behaving now ?

If the system is not stable now, then do not do any of the below steps. Instead, run the System File Checker since, according to your posted system specs, Service Pack 1 has not been installed yet - How to Repair Windows 7 System Files with System File Checker

If the system is stable, then go here, download, and save the Fixit - How do I reset Windows Update components
When the download completes close all open programs and web browsers.
With the system connected to the internet, run MicrosoftFixit50202.msi and choose it's Default mode.
Whether prompted to or not, restart the system after the Fixit finishes running.

Is the system stable now after it's been restarted ?
The Fixit should have installed the latest release of the Windows Update Agent and may have reset Windows Update to " Install update automatically (recommended) "
If the Windows Update setting was not changed to the above then please, do not change it yet.
If Windows Update setting was changed and the system is not stable, then set it to Never check for updates once again.

Using Windows Explorer ( Start orb > All Programs > Accessories > Windows Explorer ) navigate to Windows\SoftwareDistribution\Download
Move all of the contents of the Download subfolder to the Recycle Bin for now.

Go back to Windows Update and set it to "Check for updates but let me choose whether to download or install them "
Click OK, agree to the UAC prompt.

Windows Update will then do a check for updates. Is the system stable when it does that ?
If yes, then an issue in the Download subfolder was the cause of the instability.

If the system is not stable now, then run the Fixit once again and choose it's Aggressive mode.

Note: That mode will delete the updates shown on the View update history page of Windows Update but the previously installed updates can still be viewed by either opening Control Panel > System & Security > Windows Update > View installed updates or by opening Programs and Features > View installed updates.
There is no need to reinstall the previously installed updates.

Restart the system after the Fixit finishes running.
Is it stable now ?
If yes, then there was most likely an issue with either the update database (DataStore.edb) or with the updating components Permissions.