You are having the EXACT same problems that I had. And, yes, Microsoft is trying to force us into buying Windows 10.
Thank to the help I received in this forum from the fabulous Imacri, I am going to save you a lot of time and aggravation. Here is what you need to do:
1) download KB3168965 for your system (mine was 32 bit)
2) unplug from internet OR stop WU process using Task Manager
3) install KB3168965
4) restart and plug back into to internet OR restart WU
Then check for updates manually and install as per usual. It will take just a few minutes!
IMPORTANT: You no longer want Windows Update to even check for updates automatically. Everything needs to be manual going forward. You want Patch Tuesday to pass each month, and then you need to find that month's KB file that needs to be pre-installed so that you can run windows update normally.
Check back here at Bleepingcomputer in August, as this is likely going to be a permanent monthly ritual going forward!