Same exact situation. Automatic updates produced an error twice. Installed
manually, successfully (supposedly), but WU still says it's needed, and fails
again when tried. The KB workaround for creating C:\Windows\prefetch isn't
useful, since that folder does indeed already exist. Guess I could try hiding
the update, but that's not really a solution. Need someway to tell WU that I
already have it.
I notice that the successful install is titled Update for Windows (KB941649)
while the one that continually fails is titled Update for Windows Vista