Even after attempting to update without using updates. I have tried installing just by individual download, and goes through process but on restart says updates failed and reverting to previous. Then the same sorry process starts again. Any suggestions?

Scan the Windows update log or the log left by the individual installer to see why it is failing. Also double-check that the correct individual installer for your operating system was downloaded (see first link below).

Info:
Extended Protection for Authentication
How to read the Windowsupdate.log file

Checked this out and getting the following error reoccurring:
2009-08-07 14:22:59:862 1160 d1c DnldMgr * Update is not allowed to download due to regulation.
2009-08-07 14:22:59:863 1160 d1c DnldMgr Regulation: {7971F918-A847-4430-9279-4A52D1EFE18D} - Update 80CB207F-FF56-416E-BAD3-87B9837C4ECE is "PerUpdate" regulated and can NOT download. Sequence 3254 vs AcceptRate 700.
2009-08-07 14:22:59:863 1160 d1c DnldMgr Regulation: {7971F918-A847-4430-9279-4A52D1EFE18D} - Update D2B3D0A5-5015-4A18-9D83-E0044200E091 is "PerUpdate" regulated and can NOT download. Sequence 3254 vs AcceptRate 700.

Checked this out and getting the following error reoccurring:
2009-08-07 14:22:59:862 1160 d1c DnldMgr * Update is not allowed to download due to regulation.
2009-08-07 14:22:59:863 1160 d1c DnldMgr Regulation: {7971F918-A847-4430-9279-4A52D1EFE18D} - Update 80CB207F-FF56-416E-BAD3-87B9837C4ECE is "PerUpdate" regulated and can NOT download. Sequence 3254 vs AcceptRate 700.
2009-08-07 14:22:59:863 1160 d1c DnldMgr Regulation: {7971F918-A847-4430-9279-4A52D1EFE18D} - Update D2B3D0A5-5015-4A18-9D83-E0044200E091 is "PerUpdate" regulated and can NOT download. Sequence 3254 vs AcceptRate 700.

Hmm, according to Updates are not downloaded or the “Automatic Updates” icon does not display the status of downloads when you enable the Automatic Updates service, rate limiting shouldn't affect updates manually run from the Windows Update or Microsoft update web sites. In any case, if the KB968389 install has already been attempted numerous times either manually or by automatic updates, the files should already be there. Do these rate limiting entries apply to that update? There should be another error when the KB968389 update's installer ran if it wasn't successful.

Yo ! If all fails... hear this: check your time and locale settings, I found out that my update doesn't happen when time and locale are wrong.. yeah