After trying every tip I found on line for this issue, I discovered that the original Administrator account couldn't delete some deleted users' profile folders, getting a file in use error.
I found this app note:
http://support.microsoft.com/kb/320081/en-us
If you recall the notice prior to "scanning" for required update that no data is passed back to Microsoft, Windows Update _couldn't_ be directly reading an accounts' group membership to detect "not administrator". Instead the NTFS permissions on the drive are used indirectly to identify an administrator. Update must use the client PC's copy operation sending back an error code indicating that user doesn't have write access to the system drive where the update files have to be delivered.
Starting with the Windows folder, I used the remaining account that did work to take ownership of each upper level folder, forced inherited rights on the subfolders and files and last, then made the Administrators group the folder and files owner.
After that everything worked properly, and I was able to undo all the other changes suggested by the tips I'd tried. Admittedly this was a brute force method, cacls would also work.