I re-ran the update and get the exact same error as before.
All files and registry keys listed in this transaction have been successfully repaired 12:29:31, Info CSI 000001da Repair complete 12:29:31, Info CSI 000001db Committing transaction 12:29:31, Info CSI 000001dc Creating NT transaction (seq 2), objectname "(null)" 12:29:31, Info CSI 000001dd Created NT transaction (seq 2) result 0x00000000, handle 12:29:31, Info CSI CSI perf trace: CSIPERF:TXCOMMIT 96251 12:29:31, Info CSI 000001df Verify and Repair Transaction completed. 12:29:31, Info CSI 000001d0 Verify complete 12:29:31, Info CSI 000001d1 Repairing 2 components 12:29:31, Info CSI 000001d2 Beginning Verify and Repair transaction 12:29:31, Info CSI 000001d3 Hashes for file member \?\C:\Windows\Help\mui\0409\diskmgt.CHM do not match actual file "\?\C:\Windows\Help\mui\0409\diskmgt.CHM" I ran the System File Checker and it found and repaired corrupt files: 10:54:35, Info CBS Restored system sleep block state: 0x80000000 10:54:35, Info CBS Exec: Processing complete. 10:54:35, Info CBS SQM: Upload requested for report: PackageChangeEnd_Package_for_KB977206~31bf3856ad364e35~x86~~6.1.1.1, session id: 142862, sample type: Standard 10:54:35, Info CBS SQM: Queued 1 file(s) for upload with pattern: C:\Windows\servicing\sqm\PackageChangeEnd_Package_for_KB977206~31bf3856ad364e35~x86~~6.1.1.1_*_std.sqm, flags: 0x2 10:54:35, Info CBS Enabling LKG boot option 10:54:35, Info CBS Exec: End: nested restore point - complete. 10:54:35, Info CBS Reboot mark refs: 0 10:54:35, Info CBS SQM: Reporting package change for package: Package_for_KB977206~31bf3856ad364e35~x86~~6.1.1.1, current: Staged, pending: Default, start: Staged, applicable: Installed, target: Installed, limit: Installed, hotpatch status: DisabledBecauseNoHotpatchPackagesInitiated, status: 0x0, failure source: Execute, reboot required: False, client id: WindowsUpdateAgent, initiated offline: False, execution sequence: 95, first merged sequence: 95 10:54:35, Info CBS SQM: Upload requested for report: PackageChangeBegin_Package_for_KB977206~31bf3856ad364e35~x86~~6.1.1.1, session id: 142859, sample type: Standard 10:54:35, Info CBS SQM: Queued 1 file(s) for upload with pattern: C:\Windows\servicing\sqm\PackageChangeBegin_Package_for_KB977206~31bf3856ad364e35~x86~~6.1.1.1_*_std.sqm, flags: 0x2 10:54:35, Info CBS SQM: Reporting package change completion for package: Package_for_KB977206~31bf3856ad364e35~x86~~6.1.1.1, current: Staged, original: Staged, target: Installed, status: 0x800736b3, failure source: Execute, failure details: "(null)", client id: WindowsUpdateAgent, initiated offline: False, execution sequence: 95, first merged sequence: 95 10:54:35, Info CBS SQM: execute time performance datapoint is invalid. 10:54:33, Info CBS Failed to add %windir%\winsxs\ to WER report because it is missing. 10:54:33, Info CBS Failed to add %windir%\winsxs\pending.xml to WER report because it is missing. 10:54:33, Info CBS Failed to query DisableWerReporting flag. The last error looks to be the same one that shows up in the event logs, but I The first one about missing an XML file in the side by side folder doesn't seem to be important, as it looks like it can proceed without it. Perhaps the licence was corrupted, but since the first two were installed already, I never got an error when it tried to validate the OS license.
Also, I had installed XP mode and Virtual PC when I originally installed the RTM of Windows 7, not realizing you had to have a VT computer.
I seem to remember when I tried to open a case with Microsoft, it said my license key was invalid.
I am not sure of the reason, but I am somewhat convinced that the problem was more likely to be a problem with my activation state rather than any third-party apps or corrupted system files.
After a reboot, I re-attempted the install of the patch and it succeeded. I tried re-installing Virtual PC (which I can confirm was installed before) and it allowed me to reinstall. I tried re-installing XP-mode and was prompted that it was already installed. After activating I tried to again install the patch and was informed that the patch did not apply to my system. I logged on to Technet and retrieved the key I used to install it (was only at 2/10 activations). I have a valid Technet subscription, but it continued to fail.
I finally got around to doing the in-place upgrade. When I tried to install the patch again, I was informed my PC was not licensed.