Hi,
When using the "Reset PC" option, Your files will be retained if you choose the "Keep Files" option. However, it will erase all the apps you've installed. You'll need to reinstall all the apps and reconfigure them from scratch.
If a Reset/clean install is not feasible for you, you can skip or postpone the reset/clean installation. Since the WU client on your computer is broken, you may install updates manually via the Microsoft Update Catalog (More Info). Or use a tool such as WUMiniTool to install updates. [Ref: In praise of Windows Update Minitool @ AskWoody.]
Defender can be updated by running this command:
"C:\Program Files\Windows Defender\MpCmdRun.exe" -signatureupdate -MMPC
You can create a shortcut for the above command and run it elevated daily. Or configure it to run daily via Scheduled Tasks.
Chances are a future quality update or feature update will fix the WU issue automatically.
Regarding the disk space issue, you can try TreeSize Free to identify the major consumers of disk space and act accordingly. Also, some of the tips on this page How to Free Up Gigabytes of Disk Space should help.
If System Restore is occupying disk space even though the feature is turned off, run this command from the elevated Command Prompt to clear all the previous shadow copies.
- vssadmin delete shadows /for=c: /all