Disregard everything else.. heres the fix:
MANUAL FIX TO WINDOWS UPDATE LOOP
1. Insert the Recovery/Install DVD into the computer
2. Boot off of the DVD. When you first start your computer, the first screen you see should give you the key combination to press to enter a 'multi-boot' menu. On Dell's this key is F12 but it varries by each manufacturer. Once you find it and are at the multiboot menu, choose to boot of CD/DVD
3. When prompted (after it has booted to the CD/DVD) choose "repair my computer" and enter the command prompt
4. Type C: (with colon) and press enter
5. Then type cd c:\windows\winsxs and press enter
6. Then type del pending.xml and press enter
7. Restart your computer
That should kill any pending updates.
All that other advice about safemode and recovery, switching memory sticks, launching to last known config... does not work!!!! But the directions above do. I know, I tried everything.. this advice above actually worked, and I didnt have to reset to defaults, or reformat.
Good luck everyone, Microsoft better get their shit together or they just lost another customer to Mac.