I spent 12 hours solving this problem. What was happening: the update corrected an exploit a rootkit virus was using. Because it was fixed on reboot, the rootkit would not be able to function and thus locked up the computer from starting properly. By removing the rootkit virus, I was able to install the security update and the computer no longer crashed.
Full details of how to solve: http://jameswatt.me/2013/08/18/microsoft-update-kb2859537-prevents-pc-from-booting-if-rootkit-is-present/