Almost interesting. I suspect HP are right about hardware because the wireless indicator light is presumably hardwired and not subject to the vagaries of firmware or operating system.
However, I would check the computer's BIOS setup screens in case wireless has been, coincidentally, disabled at that point. BIOS options usually kick in if you depress Del as the computer powers up -- from there it may be F1 or F2.
Of course you could try System Restore to go back to before the SP1 Update.