Did you try and boot your machine into safemode and then run a full virusscan from there?
While you are in safemode open up your windows explorer and browse to the following directory:
C:\DOCUMENTS AND SETTINGS\USERNAME$\LOCAL SETTINGS
Replace USERNAME$ with your logon name or administrator.
(if you can't see the LOCAL SETTINGS folder then you can click on Tools - Folder Options - View and then enable "Show hidden files and folders")
Then go into the TEMP directory and delete everything in there (use SHIFT delete)
Once those have been deleted go to the Temporary Internet files folder and delete everything in there. (once again use SHIFT delete)
You can also run Stinger and Microsoft Malicious Software removal tool from my signature.
Once we have made sure that there is no virus then we can check if the updates work.
EDIT - you can also try and run a Panda scan:
http://www.pandasoftware.com/product..._principal.htm