Check this out previously posted by John Inzer:
(940520) An update is available to fix a Background
Intelligent Transfer Service (BITS) crash on a Windows
Vista-based computer
http://support.microsoft.com/kb/940520/en-us
If that does not work, give this a try:
Rename the SoftwareDistribution folder. (Because of possible folder
corruption or other errors.)
Click Start, Choose Run.
In the Run box, type services.msc.
Click OK.
Right-click the Automatic Updates service.
Click Stop.
Stopping the service will take a moment.
Rename the "SoftwareDistribution" folder:
a. Click Start, click Run, type %systemroot%, and then click OK.
b. Right-click the SoftwareDistribution folder, and then click Rename.
c. Type SoftwareDistribution.old, and then press ENTER to rename this
folder.
Create a new folder called "SoftwareDistribution"
Click Start. Choose Run.
In the Run box, type services.msc.
Click OK.
Right-click the Automatic Updates service.
Click Start.
Starting the service will take a moment.
Rerun Windows Update.
