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From your log you posted the error code you are seeing translates to:<br />
<br />
DnldMgr &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WARNING: CheckIfDirExists returned error 0x80070002.<br />
<br />
&quot;This problem occurs when some files in the Windows Update are missing, even though the update is downloaded and extracted successfully. &quot;
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OK in step 2 - Do you mean the contents of C:\Windows\SoftwareDistrib<wbr />ution\Down<wbr />load<br />
<br />
?
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Yes you can also rename c:\windows\SoftwareDistrib<wbr />ution to <b>softwaredistribution.old</b>
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I tried all the suggestions to try to get the updating to continue but it just wouldnt work. In the end I just cut my losses and reinstalled the OS and started again. This time I used Offline Updater as suggested and that seemed to help get the serve updated.<br />
<br />
Thanks for the help here.
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I have today started up a Windows Server 2012 Foundation Server. It has never been used before and I realize that there will be quite a few update to install. <br />
<br />
Pretty much since I started the server there has been lots of disk activity. One time when I restarted the server it said that updates had failed to install and that the system was reverting back - or words to that effect.<br />
<br />
Now on the window update screen it says that it is downloading 152 updates. It has been sat there for 2 hours and is still at 0%.<br />
<br />
There is still lots of disk activity. <br />
<br />
In resource monitor it suggests that TiWorker.exe and SYSTEM processes are responsible for most of the disk activity.<br />
<br />
They both seem to be accessing c:\windows\softwaredistrib<wbr />ution\down<wbr />loads and other folders continuously.<br />
<br />
Any suggestions?
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I have today started up a Windows Server 2012 Foundation Server. It has never been used before and I realize that there will be quite a few update to install. 

Pretty much since I started the server there has been lots of disk activity. One time when I restarted the server it said that updates had failed to install and that the system was reverting back - or words to that effect.

Now on the window update screen it says that it is downloading 152 updates. It has been sat there for 2 hours and is still at 0%.

There is still lots of disk activity. 

In resource monitor it suggests that TiWorker.exe and SYSTEM processes are responsible for most of the disk activity.

They both seem to be accessing c:\windows\softwaredistribution\downloads and other folders continuously.

Any suggestions?

Windows update seems to be stuck.

This topic area includes legacy versions of Windows prior to Windows 2000: Windows 3/3.1, Windows 95 and Windows 98, plus any other Windows-related versions including Windows Mobile.

Windows OS

Windows Server 2012 is the server version of Windows 8 and the successor to Windows Server 2008 R2. Windows Server 2012 is the first version of Windows Server to have no support for Itanium-based computers since Windows NT 4.0. Windows Server 2012, now in its second release (Windows Server 2012 Release 2) includes Foundation, Essentials, Standard and Datacenter, and does not support IA-32 or IA-64 processors.