Solution: How to install Service Pack 1 on Windows 7
Your Service Pack fails to install error given 80246007 or may be 80070003.
See here for official Microsoft solution (but see my additional information in red) :-
To change or restart the Background Intelligent Transfer Service (BITS)
You must be logged on as an administrator to perform these steps.
Open Administrative Tools by clicking the Start button , clicking Control Panel, clicking System and Maintenance, and then clicking Administrative Tools.
RIGHT MOUSE CLICK Services and SELECT RUN AS ADMINISTRATOR.
If you are prompted for an administrator password or confirmation, type the password or provide confirmation.
Right-click the Background Intelligent Transfer Service (BITS) service, and then click Properties.
On the General tab, next to Startup type, make sure that Automatic (Delayed Start) is selected. If it is not, select it and then click Apply.
Next to Service status, check to see if the service is started. If it is not, click Start.
Service Pack 1 will now install.