Sec. Upd. MS04-032 (KB840987) fails + kills server

[exess]

I all, I've got a quite serious problem involving Security Update MS04-032 on a Windows Server 2003 Enterprise Edition machine. The issue is serious because the server is vital (domain controller with important shared folders) and it keeps dying. Here is the description:

Automatic Software Update is activated. It tries to install MS04-032 (KB840987) but it fails. I tried doing it manually (using windowsupdate website) and semi-manually (clicking on the taskbar icon and saying "install now") and automatically (updates are planned to apply at 3AM). Nothing works. During install, I've got a progress bar that never fills. Nothing seems to happen. Eventually the server dies, it cannot be contacted on the network anymore, then mouse movements become jiggy (cursor jumps from place to place, no more smooth movements). It's impossible to kill the process, or even to display the task manager. I can't do anything but force shutdown and restart (unclean). Restart is impossible because {root}\windows\system32\ntoskrnl.exe has disappeared. I have to start a recovery console and re-expand it from the installation CD.

Wait, it gets even worse! The update has been downloaded and stays in the Automatic Software Update Queue, and tries to install next day at 3AM! This means every day at 3AM, my server dies!!!

What I would like to know:

1. Is there a way to delete the install from the automatic software update "ready to be installed" list?

2. Is there a way round or should I just not install this security update?

Please help...

[Marsden]

Are you using Computer Associates Unicenter Software Delivery?

That may fail after you apply the security update that is included with Microsoft security bulletin MS04-032...

[exess]

Nope. I knew about that. The only security program on this computer is Kaspersky Antivirus, and apart from that, there is no non-Microsoft software. And yes, I tried disabling the antivirus prior to updating...