Thank you for your reply - I am trying it out as I write this note.
An interesting point.
Inspite of stopping the four services, I am getting access denied when trying to rename these two folders.
Both the windows update and the cryptographic service seem to have restarted between the time I stopped them and issuing the instruction to rename the two folders.
For good measure I have booted my windows with base video:
I am sorry but there was no luck with your suggested approach. Actually, I think I have cleared my windows update catalogue in my previous attempts as well.
Is there something else I can try? Would you like to get any of the logs that will make you understand the true cause of the issue? Actually, the logging of the update is so poor that I cannot make sense of it.