I saw a post that mentioned Microsoft Security Essentials not updating in addition to Windows Update, so I uninstalled and tried to reinstall MSE - wouldn't (re)install. I then tried updating Windows Defender to see if it could update, but that wouldn't
work either. I googled Error Code from the failed Defender update and noticed mention of "Intel Matrix Storage" driver needing to be updated. I had recently installed all the drivers from the motherboard disk, so this sounded like a potential source of the
problem.
I uninstalled Intel Matrix Storage from Device Manager, "IDE ATA/ATAPI controllers, Intel driver", rebooted and let Windows install drivers automatically, and presto - Automatic Updates works perfectly again!
(Running Vista Business 32 bit)