With the WSUS issue fixed for Windows 8.1 Update 1, reports have started rolling in where the update will not install successfully in organizations using System Center Configuration Manager.
The problem is in a configuration setting for Maximum Run Time for updates. For Service Packs, the default setting is 60 minutes, but for regular updates, the default is 5 minutes.
Windows 8.1 Update 1 (and for Windows Server 2012 R2) may be the size of a Service Pack, may seem like a Service Pack, and in the past may have been regarded as a Service pack, but Microsoft has categorized it as a regular update. Usually, updates are small and can complete installation in 5 minutes or less, so the Maximum Run Time default is adequate. However, since Update 1 is a hefty size, it cannot complete in the limited time allotted for updates, so it fails.
Consider increasing the Maximum Run Time to 30 minutes or more.
See the following to learn how to increase the value: Setting Maximum Run Time for Software Updates in Configuration Manager
This tip comes courtesy of the Patch Management email list.