Problem:
You just applied the latest updates from MS and now you have Windows 7 with Service Pack 1 but your system is no longer 'genuine' and it fails this check. This may happen if you had a really 'genuine' installation or an 'adjusted' one and then you bought your legal copy.
Solution:
step 1: Uninstall "Update for Microsoft Windows (KB971033) (Control Panel->Programs and Features->"View Installed Updates"). This will uninstall WAT but you still have the WGA stuff in your system so you can re-activate your Windows safely (using your legit, previous installation, or newly acquired license)..
step 2: Restart system
step 3: Activate Windows
step 4: Start Windows Update and install all the critical and needed updates as usual (this will re-install WAT - KB971033). Windows will remain Activated.
This worked on a system I use and may not work on yours. The fact that it worked at least once, made me share this.
Good luck.
