Windows Update fails to install, KB898461

Oh where to begin. Have this computer that will not installed Windows Update KB898461. The computer has XP Home SP1. I have tried the update through the Windows Update website and from a downloaded local installer, each of them comes back with what appears to be the same issue. It looks like the update is being cancelled automatically.

I have tried all of the recommeded solutions from the Microsoft KB and most of the reliable sources I could find including articles on EE. Renamed the %systemroot%\SoftwareDistribution folder, cleared all temp folders including internet files, and checked the user premissions.

Here are some links to the errors that I am getting...
http://i256.photobucket.com/albums/hh174/accrain/failupdate1.jpg

After I click on "Check Your Update History". Notice that it says that the update has been cancelled, not failed.
http://i256.photobucket.com/albums/hh174/accrain/failupdate2.jpg

When I try to install using to downloaded installer for KB898461
http://i256.photobucket.com/albums/hh174/accrain/LocalWindowsUpdate1.jpg

Also says that the update has been cancelled.
http://i256.photobucket.com/albums/hh174/accrain/LocalWindowsUpdate2.jpg

I have also tried to use the local installer in safemode, which gave me the same issue. If one of you geniuses out there has a solutions that doesn't involve reformatting the PC, I think I will be able to regain my sanity, partially atleast. Thanks.