Were there any updates you were supposed to install before hand from Windows Update to prep the system for the update? (I ask because you did for Vista's SP1)
though, I don't think this is the problem as the SP wouldn't of shown up in the list if the system wasn't ready for it
Also that wouldn't throw a 'Access is denied' error.
Any software installed that may be blocking it? (though..if it's windows update that's installing it I don't know why that'd happen =s)