The event viewer showed the following error at the time SP1 failed.
Installation Failure: Windows failed to install the following update with error 0x80070643: Windows 7 Service Pack 1 (KB976932).
Ran sfc /scannow
Windows resource protection found corrupt files but was unable to fix some of them.
Details are included in the CBS.LOg windir\Logs\CBS\CBS.log
the log is attached (cbs.log). The failure of the sp1 installation starts at 9-16 in the log. the sfc /scannow was run on 9-16.