HA! I found the reg keys to re-enable Windows update, bypassing our WSUS server.
SUCK IT, IT!
Of course...there's 106 important updates (32 for Win7, most of the rest for Office) ( @ 1.6GB) required including one for Lync (our internal IM client) that need applied.
What exactly are they blocking them for, and who is managing/approving our WSUS updates? Geez.
ANYWAY, I'll get these rolling when I get home tonight and see if that changes the outcome of the 4.06 install and report back.