Another one for the "Really Geeky Stuff" file. Windows really has some goofy stuff that happens to it, and this one took a while to figure out.
Windows 7 ran fine, but when it came to trying to install Service Pack 1, it would move right along, everything hunky dory... until about 99% of installation complete on the restart and then BAM!!! "Reverting changes". Service Pack 1 would fail to install with an "Element not found" error. "ERROR_NOT_FOUND (0x80070490)".
After trying the Windows Update Readiness tool twice, and trying the Microsoft "Fix-it" utility for windows update (even though it said it had found a problem and fixed it each time), it was time for more research.
I finally came by this thread on the Microsoft answers forum: http://answers.microsoft.com/en-us/windows/forum/windows_7-windows_update/windows-7-sp1-wont-install-element-not-found-error/531d5f8b-c242-4487-abb7-516a491b4efe?page=1
A specific post held the answer to my issue. I'll recap the steps I took now and then point you to a couple links that actually should take credit for the fix.