The logs show the install has completed successfully but an error after reboot many times. This log does not give the reason for the failed attempts except for the error you mention. Some site suggest this is a prior install needed type message. Have you checked the Update history and looked for any failed updates, even if they succeeded later?
I found
this thread where this person seems to know what updates are causing the problem, so you might check yours.
Have you done anything like renaming the SoftwareDistribution folder? Do you have plenty of room on your C: partition?
You might go to the Windows\logs\CBS folder and look for the CBS.log. Copy it to the desktop so you can open it. Then look around the times of the failed installed attempts and see if there is anything regarding the following items.
Times:
2011-05-16 18:22:23:346
2011-05-16 18:51:16:351
References to search for:
KB976932
{E7919EF5-4E2A-4EBE-B5C2-F3FB72C1F451}
{0BC76EFA-678D-4351-A718-77B8A6D7B32A}
{F9164872-3E27-4410-B4FC-038814549BB1}
{ADC2C441-677D-4C62-BEC4-3CA015C769C3}
{5DA03162-868E-4567-80A2-D046B3FB1B09}
I think I would hide the SP1 update for a couple of days and let the other updates catch up. I would also turn off Automatic updates and check manually when you think about it. Maybe this would allow your system to repair whatever is causing the problem.
If you do have any updates that originally showed as Failed, I might think about uninstalling them and let them reinstall prior to unhiding SP1.
When you see a falloff of updates being offered , unhide SP1 and install it by itself.
Sorry I don't have a definite answer for your, but I haven't seen one item stand out relating to your situation.