Reports are rolling in today about KB3035583, which was recently reclassified in WSUS as Important. Administrators who have gone through the manual pains of blocking the Windows 10 upgrade for Windows 7 computers are finding that this newly rebrandished update is erasing those efforts. This change is being reported for both non-domain and domain-joined PCs.
As reported, after the update is installed, the Windows 10 Upgrade icon starts showing back up in the Windows 7 system tray.
If you notice this happening, you can reapply the registry modifications to continue to block the upgrade and they should work: How to manage Windows 10 notification and upgrade options
It’s just a surprise for those that find that their efforts to block the Windows 10 upgrade might not have held up due to an update installation. Many are vocally publicizing they are becoming less and less trusting of Microsoft’s update infrastructure anyway, so if this recent KB3035583 is, in fact, making the change, it's concerning. The WSUS server infrastructure took a 12-hour blackout recently, and many have been reeling for months over the lack of proper quality for updates being delivered to their organizations. Now organizations might be faced with updates that deliver silent, unwanted payloads like the ASUS motherboard disaster brought on by KB3133977.
Still one has to wonder if this is a mistake, if its only affecting a small number in very specific environments, or if Microsoft is so focused on making its 1 billion devices goal that it is willing to take a foul.
P.S. This has only been reported for Pro versions of Windows - not Enterprise or Education. Earlier today, it was uncovered that Microsoft recently made a silent change to disable the ability to block access to the Windows Store for Windows 10 Pro users.
UPDATE May 6, 2016: This issue has only be reproducible in a few reported instances and does not seem to be widespread. If you are experiencing this problem, let us know so we can help determine if its environment or configuration specific.