Sharath:
I had this problem yesterday (Aug28). My experience may contribute to understanding this problem.
Windows 7 64-bit; Norton Internet Security.
I have been manually updating my windows system on a daily basis (mornings) and have been doing this for many years. I started with DOS 4 and have used every Microsoft OS since. Never had a problem with Microsoft Windows Update. Yesterday, after my usual morning update of Internet Security software and successfully running a scan, I attempted to update Windows. I got a message informing me that there was an update to the Update Agent and I needed to "click" on install in order to update the Agent, after which it would continue with the search for Windows update. Once the Agent updated it continued and came up with the error message 80246002. I subsequently tried every solution, including Mr. FIXIT. I then called Microsoft Support and chatted with the answer desk. The person asked for permission to remotely access my computer, and I reluctantly agreed. Bad decision!
After about 90 minutes he was unable to resolve the issue and in the process, had messed up my system, including removing my Internet Security. He then, without asking me, went ahead and restored my system using system restore. This involved a restart, after which I lost my internet connection. It took me a while to re-configure my internet connection. I then restored my system using an earlier backup I had made, and re-installed Internet Security which was still missing.
It is clear after everything I have read on this site, that the problem is the faulty Microsoft Windows Update Agent 7.6.7600.320 which was installed as part of the Agent update. My system is now working normally. I am NOT going to use Windows Update until such time as I am assured that the Agent has been fixed by Microsoft. Other people I know who have Windows 7 are having the identical problem. What we need is to hear from Microsoft that they have cured the problem.