Windows 7: Windows Updates Not Installing : Error Unknown (Sits on Installing)

It's a DVD, not a CD
If you want to do a repair install, don't enter your Key (the system will input its own default Key - you can correct it later)

So I ran a custom install and halfway through initial step I am getting an error code0x80070241. Says "Windows cannot copy files required for installation. The files may be corrupt or missing. Make sure all files req'd for installation are available, and restart the installation. Makes no sense to me because I would expect all the req'd files to be on the DVD... Is it a bad DVD?

It's possible - is the disk clean and unscratched?
Is the disk a commercial one, or did you download and burn it yourself?

Its an original copy, unscratched, and it looks clean to the eyes. I have it in the plastic case I bought it in so I wouldn't think there would be any issues with it.....

in that case, suspect hardware problems.
In view of your other history, I would suspect RAM or power supply problems.
download the RAM tester from www.memtest.org and run it for a few hours - see what it has to say.
What is the make/model of your PSU? how old is it? can you test it, or swap it out for a higher-spec unit?

I am running a Intel Core i7-2700K CPU @ 3.5GHz on an Asus Sabertooth Z77 Motherboard with 6 gigs of Corsair DDR3 Ram, NVidia GeForce GTX 670 Video Card and a 650W PSU. I was told the 650W would be sufficient when i purchased the bulk of the components but whether or not they didnt really know is another story.... Unfortunately the only other PSU I have around is only a 500W from a old Dell I got for 50 bucks. I will run memtest and see what I get back...

The problem with many PSU's is that the overall rating is overstated - and isn't really that good a guide of the ability of the unit to cope with loads in real life (which is why I asked for make/model)
a 650W supply should be enough - but either the 5V or 12V line may be weak, or the unit may be faulty.

Ah ok, well it's a OCZ ZT series Power Supply. 80 plus bronze certified. Model OCZ-ZT650W. I guess if this is the issue I'll be more aware of power supply ratings ><.

I ran the windows memory test and it said everything was ok. I am running memtest86 for just about 9 min now and have 146,944 errors oO.

I think we've found your problem - try reseating the RAM and see if that helps.
If not, test each stick individually in the same slot
If all fail, try a different slot.