svchost.exe pegs cpu after SP1 install

I'm managing a colocated Server 2003 box (Dell PowerEdge P3 - 1400MHz - 1.5GB ram). Since installing Service Pack 1 the CPU utilization is pegged at 100% pointing to svchost.exe. I'm also finding I have to re-start IIS after any reboot to enable .net pages to compile (attempts to hit an aspx on a fresh reboot brings up a Error Code 128 compiler error).

I'm considering backing the service pack out but am concerned that'd cause even more problems. (I've tried just terminateding the scvhost.exe - it will but restarts itself pegging the cpu again.

The following may or may not have anything to do with the above.
As I look in Event Viewer i only find this Error in system

The application-specific permission settings do not grant Local Activation permission for the COM Server application with CLSID
{0C0A3666-30C9-11D0-8F20-00805F2CD064}
 to the user NT AUTHORITY\NETWORK SERVICE SID (S-1-5-20).  This security permission can be modified using the Component Services administrative tool.

For more information, see Help and Support Center at http://go.microsoft.com/fwlink/events.asp.

Following that link leads me to a page that starts with this instruction:

Using Regedit, navigate to the following registry value
HKCR\Clsid\clsid value\localserver32

I can find the clsid value but not the final part of that path... 'localserver32' The default value points to Machine Debug Manager. The only other value is AppID. Looking at the properties page for  Machine Debug Manager ...the Debugging Users have all permissions checked.

Any thoughts?