We are noticing more and more reports about Windows 7 and Server 2008 R2 SP1 upgrade problems.
The issues, which apparently result in Windows PCs that refuse to boot and display the error message 0xC0000034. The upgrade problems are apparently limited to cases in which users downloaded the update via Microsoft's Windows Server Update Services (WSUS). Microsoft already reacted to the reports with a Knowledge Base article and is offering workarounds for Windows 7 and Windows Server 2008 R2.
The simple advice for Windows 7 users is to return the system to a restore point before the service pack was installed. The server OS cannot be fixed with this method and requires editing of the Windows Registry. Microsoft explicitly advises not to attempt to edit the pending.xml file to resolve the issue.