It's not a bad patch. Clearly when folks are able to get around this issue by changing DNS settings, this is not a patch issue.
I'm wondering how much is this connected to Time Warner and possibly we are more interconnected on the Internet then we know.
As I said above *any* functional DNS servers that your ISP provides should work to get you to Microsoft update. If every impacted poster here said they were using one specific ISP I could go AH HA there's the root cause and point to the ISP as the source
of the problem. But clearly we don't have one ISP at play here.
Bottom line if it doesn't magically resolve itself (as mohieddineayes indicates above) - which in turn points to a ISP root cause - then move your DNS to an alternative provider such as Google DNS or OpenDNS.
Again, and personally, I prefer OpenDNS due to the additional web filtering ability it provides. I can also state that here at the office and at home where I've always pointed my dns to opendns' IP addresses, I've had zero failures of Microsoft update.
So to answer your question, the Internet has gone bonkers is what I would say the root cause is.