Problems are being experienced with Windows 7 Service pack being installed automatically with Windows updates. These problems are not related to the service pack itself but with the way it is installing. The problem is being caused when it installs alongside other updates.
The solution is to either install the service pack manually by downloading it from the Microsoft website and installing it on its own. If you would prefer not to have the service pack installed yet, make sure you switch off Windows updates.
The service pack can be downloaded here.