I think I have tracked this down.
I rather foolishly let windows update install a new network driver. Reverting back to the HP driver has fixed this issue. Once again I have learned that microsoft cannot be trusted when it comes to installing drivers :-(
With drivers I tend to folow the old saying "If it ain't broke don't fix it". A colleague of mine updated a printer driver on the network (because it was newer and available, no other reason), that turned out to be more dodgy than the old current one. I then couldn't get hold of the old current one, and this lead to no end of problems.
Ok this is really starting to annoy me.
I have used the Netsh winhttp import proxy source=ie to import the windows update settings to the server. I am using updateproxy.swgfl.org.uk for updating.
The server will now run the update. However, two windows 7 workstations are having a hell of a job updating.
Is there any voodoo that I am unaware of that you do without thinking that I have missed out?
ATM I am thinking it's something obvious, a network switch issue or a swgfl issue.
All insights would be useful as I am tearing my hair out at this and I have real work that I need to do!
Issue reared its head again, server 2012 - I found that just leaving it, sometimes for a few hours let it complete normally. Its all very hit and miss however as its random times and random durations.
The only factor that remains the same is I get Windows Update is not responding errors, these also pass with time.
Setting updateproxy.swgfl.org.uk and then running Netsh winhttp import proxy source=ie <<< seems to do the trick.
Everything is working now, slowly but reliably. It seems to be related to updated versions of the update client. The older they are the more flakey they are. Well certainly whilst sitting behind swgfl proxies anyhow. I am STILL updating servers, it is taking forever but it is working!