There's been many emails and posts about this since I replied to a Technet Forum post a few weeks back. This is a known issue we've investigated and identified as a bug in Hyper-V RC1. Limiting the number of processors to 1 physical sockets worth of cores using msconfig (eg 4 if dual quad procs, 2 if dual dual-procs) is one option. We have fixed this for the next public release. Although I can't say what and when that will be, for now, short of rebuilding and sticking with RC0, the numproc workaround is the only fix. With one exception to date, this has only been seen with dual-socket quad-core Intel processors (the one exception was on a box with Intel Xeon 5160 dual core processors). Additionally, if you see similar launch failures in the event log with RC1, I would strongly recommend you upgrade to the latest BIOS for your machine. In several instances, we have seen alternate "features needed" codes which a BIOS fixed.
By the way, are Hyper-V updates still something that System Restore can back out of? i.e., if one encountered this problem, would you be able to just System Restore to fix it?
That has been my plan for such a situation...
Mark - a great question, but one I don't know the answer to - I'd have to try when I get some time. The RC0 and RC1 releases though are not in themselves uninstallable (ie they are "permanent" updates).