Microsoft has yanked the prerequisite update for Windows Vista KB937287. On its blog site Microsoft has also provided the following information to assist those who are experiencing the loopback problem:
We’ve heard a few reports about problems customers may be experiencing as a result of KB937287, the servicing stack update I blogged about last week, and I wanted to provide a quick update for you. Immediately after receiving reports of this error, we made the decision to temporarily suspend automatic distribution of the update to avoid further customer impact while we investigate possible causes.
So far, we’ve been able to determine that this problem only affects a small number of customers in unique circumstances. We are working to identify possible solutions and will make the update available again shortly after we address the issue.
Customers who may be experiencing this issue can use system restore to correct it or contact 1-866-PC-Safety for help troubleshooting. Additional guidance will be available via Microsoft’s free Update Support Center soon.
So there you have it. There is a problem with this specific update, but outside of a restore, no other fix is available. For those having the problem, I would recommend trying to call for support and see what happens.
Blog posting is here.