As already found here  there seems to be a global issue with SP1 for Essentials.


One problem I have seen is around a missing WSUS 'selfupdate' directory.  In this instance, this fix worked;

1.       create a SelfUpdate virtual directory and point it to c:\program files\update services\selfupdate

2.       An IISRESET after this should see the Update Service running. 

3.       Make sure the update server is pointing to the right location to get the updates and

4.       run “wuauclt /detectnow /resetauthorization” on the client to make sure.


If it is an authentication issue on the web server, reinstalling IIS and WSUS can fix it.