ERROR CODE 0x80072EE2

Sometimes Windows 7 users may see error code 0x80072EE2. This can occur when the update server is busy. Windows Update servers might be experiencing an unusually high number of requests for updates. Close Windows Update, wait 10 to 15 minutes, and then run Windows Update again. You can also wait for Windows Update to run at its next scheduled time.

This has been see with Windows update as well as with Windows activation.

Many manufacturers distributed images with a policy set defining a automatic update server. The concise answer to
this problem is to remove that registry key. The key is:

HKEY_LOCAL_MACHINESOFTWAREPoliciesMicrosoftWindowsWindowsUpdateAU

remove this key, reboot, and windows update should work better.