Can't start automatic updates on machine

have you tried to update from windowsupdate.microsoft.com instead of inside windows?

Take a look at the "Answer" here:

http://answers.microsoft.com/en-us/windows/forum/windows_xp-performance/the-exception-unknown-software-exception/938d7fcc-9ac6-4209-8b33-8ad7c27a6664

Try the steps outlined here:

http://www.askiyogi.com/windows/8272.html

THe machine is starting just fine.  I can't get to windowsupdate because I'm getting an error there too.

http://social.technet.microsoft.com/Forums/windows/en-US/eeba9c17-a78d-4023-b0d9-184d0ece6169/the-exception-unknown-software-exception-0xc06d007e-occurred-in-application-at-location-0x7612d36f

Windows update can have lots of problems.

Throw the following into a file called doit.bat

rem Stop BITS
Net Stop "Background Intelligent Transfer Service"

rem Stop Windows Update Service
Net Stop "Windows Update"

rem change to Windows Software Distribution Directory--DataStore
cd "%windir%\SoftwareDistribution\DataStore"

echo Wipe the %windir%\SoftwareDistribution\DataStore folder
rem wipe everything out in the DataStore folder
erase "%windir%\SoftwareDistribution\DataStore\*.*" /Q /F /S
rem wipe any sub directories
for /d %%X in ("%windir%\SoftwareDistribution\DataStore\*") do rmdir /s /q %%X 

rem change to download folder
cd ..\Download

echo Wipe the %windir%\SoftwareDistribution\Download folder
rem wipe everything out in the Downloads folder
erase *.* /Q /F

rem loop through all sub directories in Download and kill them all
for /d %%X in ("%windir%\SoftwareDistribution\Download\*") do rmdir /s /q %%X 
rem Start Windows Update Service
Net Start "Windows Update"

rem Start BITS
Net Start "Background Intelligent Transfer Service"

Select allOpen in new window

Save that file and then run it.  It should attempt to fix some windows update problems.
Next be sure your firewall and IE allow access to windows updates.
Check the hosts file for bogus entries also:
c:\windows\system32\drivers\etc\hosts

If it has the windows updates address in there and it points to a bad address that would cause it--malware might add this.

OK i just restarted the machine and got a strange error... The application or DLL C:\system32\sfc_os.dll isn not a vaild windows image.  Going to try to reinstall service pack 3

There is no c:\system32 by default if that is not c:\windows\system32 you have an infection.

https://community.mcafee.com/message/121729

no virus.  I just simply reinstalled service pack 3 and ti work.  This was the closest solution. thanks everyone.