Sorry should have got the logs again before I fixed this, but I got it!! Did more and more reading on the error and found a sight that suggested Kaspersky TSSKiller
(dl from cnet
If found one problem, didn't write it down because I assumed the program would keep a log, but it does not. It removed a malware attached to a system file, asked for reboot. Ran the Windows Update FixIt (for the 30th time) then proceeded to download and update 54 updates.
I suggest the mods checking it out and maybe recommending it for all for all Windows Update problems...after all the basic stuff.
Again, before this, I did..
Restart Update Service
Modified Registry File
Much more too, just about all of them.
Thanks for the help and the nice forum guys! Ill be sure to come back if there are future problems.