Success!!
I've finally cracked it and it turns out it was one of those weird issues that could only have come from our dear Microsoft.
I used Process Monitor as you suggested but it was producing frankly insane amounts of data, nearly 2 million entries per minute for several hours it crashed my PC the first time.
I watched it closely the second attempt, clearing the results as it went so it didn't overload. As it progressed I noticed why it had been taking so long, Modern Setup Host was going through my entire 350GB Documents folder and looking at every single file like some creepy uncle. After a while it got to a folder that contained a copy of an old Windows XP hard drive including it's windows directory. Modern Setup Host seemed to get stuck here and for over an hour I watched as it scanned the directory over and over again, mostly the System32 folder and subfolders.
On a whim I moved the folder out of my documents directory and the program continued trying to scan it but now saying the files were missing. Eventually I had had enough and it was obviously not going to progress so I restarted my machine and tried again with the Windows XP directory left outside of my main Documents folder.
Ran setup again, and to my astonishment the update installed straight off with no further hiccups.
Thanks for your time and patience, I hope this weird story helps in your future troubleshooting!
Also to Microsoft: what business do you have nosing around in my Documents folder when doing an upgrade anyway!?
