This was the only way I found to fix this:
Be very careful editing windows registry
For Windows Vista/7
Click Start and type regedit in the Search Programs and Files field. Then right-click on
regedit in the programs list and select Run as Administrator.
Within the Registry Editor, navigate to: HKEY_LOCAL_MACHINE\SOFTWARE\Policies\Microsoft\Windows\WindowsUpdate\AU.
On the right side of the window, locate AUOptions and NoAutoUpdate. Delete both of these registry keys.
Reboot
You should now be able to edit Windows Update