The system file check not finishing is not a good sign.
Where did you get your install media?
Continuing Titanic's thought, after you reinstalled, did you reactivate or enter the License key? If you did, you probably had to call Microsoft and go through the automated process. If you did not enter the key, this should not be an issue. Of course, if you have an OEM version, it cannot be transferred.
Windows Update problems can be caused by network problems, and there were a couple of updates around the time SP1 came out that were causing system problems.
If you do not know, you can download a Windows 7 Install DVD .iso file with SP1 already included.