Cannot run Windows Update and Receiving Non-Genuine Message

OK - I think I've managed to find the critical error point...

Code:

Log Name:      Application
Source:        Windows Error Reporting
Date:          16/01/2015 00:04:52
Event ID:      1001
Task Category: None
Level:         Information
Keywords:      Classic
User:          N/A
Computer:      SteveServer
Description:
Fault bucket , type 0
Event Name: WindowsWcpOtherFailure3
Response: Not available
Cab Id: 0
Problem signature:
P1: 6.1.7601
P2: base\wcp\servicingapi\cmirepair.cpp
P3: Windows::ServicingAPI::CCSIRepairTransaction::LockComponent
P4: 312
P5: 80073701
P6: 0x5858a98f
P7: 
P8: 
P9: 
P10: 
Attached files:
C:\Windows\Logs\CBS\CbsPersist_20150114144605.cab
C:\Windows\Logs\CBS\CbsPersist_20150114205947.cab
C:\Windows\Logs\CBS\CbsPersist_20150115093137.cab
C:\Windows\Logs\CBS\CbsPersist_20150115140221.cab
C:\Windows\Logs\CBS\CbsPersist_20150115160721.cab
C:\Windows\Logs\CBS\CbsPersist_20150116000450.log
C:\Windows\Logs\CBS\CBS.log
C:\Windows\servicing\Sessions\Sessions.xml
C:\Windows\winsxs\poqexec.log
C:\Windows\System32\LogFiles\Scm\SCM.EVM
C:\Windows\Logs\CBS\FilterList.log
C:\Windows\Temp\WER1FBC.tmp.hdmp
C:\Windows\Temp\WER220E.tmp.mdmp
These files may be available here:
C:\ProgramData\Microsoft\Windows\WER\ReportQueue\Critical_6.1.7601_32657f657c59ef3581571884505742f8f280ac_cab_8f8823f0
Analysis symbol: 
Rechecking for solution: 0
Report Id: 4a526326-9d13-11e4-a7ea-b8ac6f41b283
Report Status: 4
Event Xml:
<Event xmlns="http://schemas.microsoft.com/win/2004/08/events/event">
  <System>
    <Provider Name="Windows Error Reporting" />
    <EventID Qualifiers="0">1001</EventID>
    <Level>4</Level>
    <Task>0</Task>
    <Keywords>0x80000000000000</Keywords>
    <TimeCreated SystemTime="2015-01-16T00:04:52.000000000Z" />
    <EventRecordID>305937</EventRecordID>
    <Channel>Application</Channel>
    <Computer>SteveServer</Computer>
    <Security />
  </System>
  <EventData>
    <Data>
    </Data>
    <Data>0</Data>
    <Data>WindowsWcpOtherFailure3</Data>
    <Data>Not available</Data>
    <Data>0</Data>
    <Data>6.1.7601</Data>
    <Data>base\wcp\servicingapi\cmirepair.cpp</Data>
    <Data>Windows::ServicingAPI::CCSIRepairTransaction::LockComponent</Data>
    <Data>312</Data>
    <Data>80073701</Data>
    <Data>0x5858a98f</Data>
    <Data>
    </Data>
    <Data>
    </Data>
    <Data>
    </Data>
    <Data>
    </Data>
    <Data>
C:\Windows\Logs\CBS\CbsPersist_20150114144605.cab
C:\Windows\Logs\CBS\CbsPersist_20150114205947.cab
C:\Windows\Logs\CBS\CbsPersist_20150115093137.cab
C:\Windows\Logs\CBS\CbsPersist_20150115140221.cab
C:\Windows\Logs\CBS\CbsPersist_20150115160721.cab
C:\Windows\Logs\CBS\CbsPersist_20150116000450.log
C:\Windows\Logs\CBS\CBS.log
C:\Windows\servicing\Sessions\Sessions.xml
C:\Windows\winsxs\poqexec.log
C:\Windows\System32\LogFiles\Scm\SCM.EVM
C:\Windows\Logs\CBS\FilterList.log
C:\Windows\Temp\WER1FBC.tmp.hdmp
C:\Windows\Temp\WER220E.tmp.mdmp</Data>
    <Data>C:\ProgramData\Microsoft\Windows\WER\ReportQueue\Critical_6.1.7601_32657f657c59ef3581571884505742f8f280ac_cab_8f8823f0</Data>
    <Data>
    </Data>
    <Data>0</Data>
    <Data>4a526326-9d13-11e4-a7ea-b8ac6f41b283</Data>
    <Data>4</Data>
  </EventData>
</Event>

Please upload the following files - if you can find them...
C:\Windows\servicing\Sessions\Sessions.xml
C:\Windows\winsxs\poqexec.log
C:\Windows\System32\LogFiles\Scm\SCM.EVM
C:\Windows\Logs\CBS\FilterList.log
C:\Windows\Temp\WER1FBC.tmp.hdmp
C:\Windows\Temp\WER220E.tmp.mdmp

I'll see if I can make any sense of them!

To be honest, I can't make head nor tail out of that lot!
Jack - you have any experience with these?

Noel please check your PM's.

I don't see KB 971033.

I'm not a expert on such matter like Noel is but I do have some thoughts.

1. Post #1 you post this.

Windows License Type: OEM System Builder

Then in post 37 you post this.

Faulting application path: C:\Program Files\KMSpico\Service_KMS.exe

I have no idea how that could happen without a hack of some kind.

2. If Microsoft while helping you would of seen KMSpico installed all help would of stopped from Microsoft.

3. To my understanding a KMS system must contact the host KMS computer after (X) amount of days in order to get updates and renew it's activation according to the policies the I.T. department have set up. You do not mention of trying to contact the host KMS computer.

4. You have so many mismatched and tampered files and had KMSpico their is no way of knowing what has and is going on with your activation.

Putting all this together in my opinion Noel's doesn't have enough magic to fix this. Any more time trying to fix this install would be a waste of time.

My recommendation would be a Clean Install of Window 7 with the proper COA key that matches the install.