So the error code didn't change when you reset the software distribution folder?
Ok, check and make sure your windows update service and BITS are running.
Did you zipping up the CBS log follow running a sfc /scannow? It looks a little different then I am accustomed to seeing.
Usually the update readiness tool fixes that one...Are you running SP1?
I have had limited success with grabbing the fullfile DL of SP1, and reinstalling it. That will reset windows update back to an old version that maybe your PC will be able to update.
I'm not the CBS.log expert, maybe Jcgriff or Will Watts will chime in since I haven't seen this particular issue before.