There is a probably a million reasons why Windows 7 SP1 will fail to install. Below is my tail. An Error occurred and in the event log it shows:
Installation Failure: Windows failed to install the following update with error 0x80070643: Security Update for Windows 7 for x64-based Systems (KB2510531).
You should find more details in c:\Windows\Logs\CBS\CBS.log and in this case I found.
SPI: (PerformSPInstallation:812)Insufficient disk space hr=0x800f0828
Once you increase the desk space Sp1 will install