Reset NTFS permissions on system drive 2008r2

I have a 2008r2 file server that refuses to run windows update. I have multiple 257 and 491 events in the log. I did some research and found that the default permissions for the local users group might be causing the problem. I have tried resetting the permissions on the drive, but I get Access Denied even when using the local administrator account. Is there a way to reset the default NTFS permissions on the system drive?
tmalmondAsked:
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awawadaCommented:
If you run Windows Update which error do you get?
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tmalmondAuthor Commented:
They fail with code 8000FFFF.
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awawadaCommented:
Try all steps from this KB:
http://support.microsoft.com/kb/2509997/en-us
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tmalmondAuthor Commented:
Tried all the steps in the article. Still not working. I think the permissions on the drive need to be corrected. The evidence is the event 297 and 451 which appear all the time in the app log.
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awawadaCommented:
Can you post a printscreen of all errors?
- Error during windows updates
- Event 297 and 451
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tmalmondAuthor Commented:
Here are the error messages.

Windows Update Error Message
Log Name:      Application
Source:        Microsoft-Windows-CAPI2
Date:          8/26/2014 8:27:07 AM
Event ID:      257
Task Category: None
Level:         Error
Keywords:      Classic
User:          N/A
Computer
Description:
The Cryptographic Services service failed to initialize the Catalog Database. The ESENT error was: -1032.

Log Name:      Application
Source:        ESENT
Date:          8/26/2014 8:27:07 AM
Event ID:      491
Task Category: General
Level:         Error
Keywords:      Classic
User:          N/A
Computer
Description:
Catalog Database (180) Catalog Database: An attempt to determine the minimum I/O block size for the volume "C:\" containing "C:\Windows\system32\CatRoot2\" failed with system error 5 (0x00000005): "Access is denied. ".  The operation will fail with error -1032 (0xfffffbf8).
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awawadaCommented:

1.


Please rename the following logs to old:
             
- %windir%\logs\cbs\cbs.log
- %SYSTEMROOT%\Logs\CBS\CheckSUR.log
- %SYSTEMROOT%\WindowsUpdate.log

2.


Run sfc/scannow again

3.



Run System Update Readiness tool again:
http://www.microsoft.com/de-de/download/details.aspx?id=1593
http://download.microsoft.com/download/9/4/F/94F5EF18-AD48-4928-B0B1-437050FC8ED3/Windows6.0-KB947821-v34-x64.msu

4.


Post me all the new logs.
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tmalmondAuthor Commented:
I completed the procedure. Here are all the logs.
CBS.log
CheckSUR.log
WindowsUpdate.log
CBS1.log
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awawadaCommented:
Thanks I will have a look at the logs.
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awawadaCommented:
Thank you again for your patience.

You will have to do a In-Place Upgrade:
http://support.microsoft.com/kb/2255099
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tmalmondAuthor Commented:
I was hoping to avoid, but feel confident that this is the correct solution. I have tried everything else!
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Windows Server 2008

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