...after spending hours and hours trouble shooting this issue with MS Support, to no avail, it was decided to do an 'Install-Repair'.
After the 'Install-Repair', win7 reported a corrupted 'NET-Framework v4'. After Win7 fixed this, all the updates were downloaded and installed. Finally, the last update, being SP1, I ran the 'Hotfix', before the SP1 install. SP1 installed without any issues.
Hope this helps someone!
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