Cannot Install Windows 7 SP1 (64-bit)

It looks like the hr = 0x80070490 is an error. Which led me eventually to: http://support.microsoft.com/kb/971058 from what I can tell there are missing components or something not setup properly, but the above links is to a "fixit" that should take care of the problem

If the solution by tkrabec does not solve it, download and run the SUR tool, once this is done perform a safe boot and install the downloaded SP1 exe.

To Boot Clean in Windows 7 and Vista

Accessing the System Configuration Utility

1. Click Start, type, msconfig in the search box and press Enter

Configure Selective Startup options

1. On the General tab, choose Selective Startup
2. Uncheck Load Startup Items
3. Select the Services tab
4. Check Hide all Microsoft services
5. Click Disable all
6. Click on OK
7. Click Restart.

After performing the necessary steps and installing SP1, restore your system to normal boot by doing the following:

1. Click Start type msconfig in the search box and press Enter
2. On the General tab, choose Normal Startup
3. Click Ok
4. Click Yes, when asked to restart your computer