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Automatic Updates Hang Server 2003

I have a Windows Server 2003.  When I turn on the microsoft updates to update every night, the server hangs on reboot.  I have to restart in safe mode with last good configuration.  When I turn off automatic updates, it boots fine.  It just started doing this and I'm not sure if it is the particular updates that are causing the problem or something else..  Can someone help!  
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It's not a good practice to set it to "automatically download and install," if that is what you're doing.  Rather, I like to set it to "Download updates but let me choose whether to install them."  That way I have control over what updates get installed, and with that said, I am able to narrow down a faulty update causing problems.
Try following

1.  Stop the Automatic Updates service
2.  Delete the C:\Windows\SoftwareDistribution folder.  This is where updates are downloaded to.
3.  Start the Automatic Updates service.

This deletes the Automatic Updates download cache and lets the Automatic Updates service repopulate it once the service is restarted

Upgrade or repair I.E
are you behind any firewalls that may be preventing access to or * (a little too obvious, but worth asking)
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We deleted the software distribution folder and restarted automatic updates.   The update said it finished successfully but when automatic updates was turned back on, it still hangs on reboot.  We upgraded to IE 8 and there are no problems updating through firewalls.  It seems to be when auto updates is on, it won't reboot unless you choose to reboot from last known good configuration.  Any other ideas?
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Anything unusual in your server logs?