To Unlock Windows Update locked due to group policy.
Open gpedit.msc and browse to the location /Computer Configuration/Administrative Templates/System/Internet Communication Management/Internet Communication Settings and double click "turn off access to all windows update features" and set it to disabled.
Open regedit and back up the key
and delete WindowsUpdate as it may contain your administrator settings for windows update which includes a WSUS server address, this entry prevents your windows update from contacting windows update directly.
Repair windows update using the online troubleshooter for windows 7 from here
Open the Windows Update troubleshooter by clicking the Start button , and then clicking Control Panel. In the search box, type troubleshooter, and then click Troubleshooting. Under System and Security, click Fix problems with Windows Update.
Congratulations your windows updates are now unlocked, only until you reboot next of course.