One of Microsoft's May 2007 patches had a problem that caused the svchost.exe to peak at 100% while trying to update.

The update will never complete as it times out due to the 100% CPU usage.

Thus you need to turn Auto Update off and perform a manual update. You may have to reboot your PC after turning Auto Update off.

Once you've performed the manual update, it should show that you need one update... the one that will fix the problem.

Manually apply that patch and you should be able to turn auto-update back on again.