We have a Win2k3 server which always reports a pending reboot on the WSUS client before it will continue, a reboot doesn't fix it.
GPO isn't an issue as all the other servers work perfectly. Trying to update the ESX vmware client also reboots a reboot is pending.
Here's an example of the log:-
2013-02-23 07:18:50:391 3180 1814 Misc =========== Logging initialized (build: 7.4.7600.226, tz: -0000) ===========
2013-02-23 07:18:50:391 3180 1814 Misc = Process: C:\WINDOWS\system32\wuauclt.exe
2013-02-23 07:18:50:391 3180 1814 AUClnt Launched Client UI process
2013-02-23 07:18:50:407 900 c88 AU Windows Update is disabled by policy for user
2013-02-23 07:18:50:407 3180 1814 Misc =========== Logging initialized (build: 7.4.7600.226, tz: -0000) ===========
2013-02-23 07:18:50:407 3180 1814 Misc = Process: C:\WINDOWS\system32\wuauclt.exe
2013-02-23 07:18:50:407 3180 1814 Misc = Module: C:\WINDOWS\system32\wucltui.dll
2013-02-23 07:18:50:407 3180 1814 CltUI FATAL: Failed to get notification handle, hr=80240025
2013-02-23 07:18:50:516 900 b94 AU AU received handle event
2013-02-23 07:19:05:516 900 b94 Misc WARNING: IsSessionNonstandardUI: WTSQuerySessionInformation(WinStationInitialProgram) failed for session 0, GetLastError=0
2013-02-23 07:19:05:516 900 b94 AU Launched new AU client for directive 'Reboot Pending', session id = 0x1
2013-02-23 07:19:05:516 4604 12d8 Misc =========== Logging initialized (build: 7.4.7600.226, tz: -0000) ===========
2013-02-23 07:19:05:516 4604 12d8 Misc = Process: C:\WINDOWS\system32\wuauclt.exe
2013-02-23 07:19:05:516 4604 12d8 AUClnt Launched Client UI process
2013-02-23 07:19:05:532 900 1ce0 AU Windows Update is disabled by policy for user
2013-02-23 07:19:05:547 4604 12d8 Misc =========== Logging initialized (build: 7.4.7600.226, tz: -0000) ===========
2013-02-23 07:19:05:547 4604 12d8 Misc = Process: C:\WINDOWS\system32\wuauclt.exe
2013-02-23 07:19:05:547 4604 12d8 Misc = Module: C:\WINDOWS\system32\wucltui.dll
2013-02-23 07:19:05:547 4604 12d8 CltUI FATAL: Failed to get notification handle, hr=80240025
2013-02-23 07:19:05:657 900 b94 AU AU received handle event
2013-02-23 07:19:20:657 900 b94 Misc WARNING: IsSessionNonstandardUI: WTSQuerySessionInformation(WinStationInitialProgram) failed for session 0, GetLastError=0
2013-02-23 07:19:20:657 900 b94 AU Launched new AU client for directive 'Reboot Pending', session id = 0x1
2013-02-23 07:19:20:657 4148 1d48 Misc =========== Logging initialized (build: 7.4.7600.226, tz: -0000) ===========
2013-02-23 07:19:20:657 4148 1d48 Misc = Process: C:\WINDOWS\system32\wuauclt.exe
2013-02-23 07:19:20:657 4148 1d48 AUClnt Launched Client UI process
2013-02-23 07:19:20:672 900 17e4 AU Windows Update is disabled by policy for user
2013-02-23 07:19:20:688 4148 1d48 Misc =========== Logging initialized (build: 7.4.7600.226, tz: -0000) ===========
2013-02-23 07:19:20:688 4148 1d48 Misc = Process: C:\WINDOWS\system32\wuauclt.exe
2013-02-23 07:19:20:688 4148 1d48 Misc = Module: C:\WINDOWS\system32\wucltui.dll
2013-02-23 07:19:20:688 4148 1d48 CltUI FATAL: Failed to get notification handle, hr=80240025
2013-02-23 07:19:20:797 900 b94 AU AU received handle event
2013-02-23 07:19:35:797 900 b94 Misc WARNING: IsSessionNonstandardUI: WTSQuerySessionInformation(WinStationInitialProgram) failed for session 0, GetLastError=0
2013-02-23 07:19:35:797 900 b94 AU Launched new AU client for directive 'Reboot Pending', session id = 0x1
I have looked for the following key and it doesn't exist
HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\Windows\CurrentVersion\WindowsUpdate\Auto Update\RebootRequired