Thanks for the suggestions. I did reply earlier, but it seems the message did not make it. The gist of it was this.
The looping wouldn't let me boot into Vista safe mode, even using the repair disk, or i could have done a system restore from there. So SFC scanning didn't work.
What did work was following the article at http://support.microsoft.com/kb/949358 that you mentioned. Method 3: Going into DOS and renaming the pending.xml file plus the other suggested registry changes. That stopped the looping,
and i was able to restore the system to prior the Windows update.
I have the following suggestions that could improve the experience for others:
1) The repair disk boots you into an X: drive directory. From there, my machine wouldn't respond to the the cd command suggested. My DOS being a little rusty, it took me a while to think to change drives by typing C: before typing in the cd string. If this
is a generic issue, it would be helpful to us non-DOS experts to include the instruction to type C: before the change directory instructions.
2) Since the registry changes and the original update failure itself may have damaged the registry, it seemed prudent, once having access to Vista, to restore the system to a time before the Windows update event that caused the problem. Adding this action
into the instructions may be beneficial.
3) I see from all the many similar posts, that this stage 3 looping problem has quite a history, and has not been fixed. So my last point is more of a plea to Microsoft to please fix the problem - permanently.
This frustrating experience has undermined my confidence in the 'auto-update' feature, which i have now switched off. Many "experts" recommend checking monthly for updates instead of using the auto-update feature. So i shall try this approach in future.
Thanks for your helpful input Amritha, MickyO , Oliver and the other posters.
Regards,
davidmac11