If you cant add the WSUS role on a windows 2008 r2 machine here is how you can do it:

Download WSUS 3.0 sp2 from Microsoft website: link

Download Microsoft Report Viewer Redistributable 2008 from here

if you have IIS already installed don’t try to install windows .net framework 3.5 sp1. Its now a feature in windows 2008 server and does not appear in add/remove programs. thanks Microsoft

Now for the gray hair part. If you plan to use windows internal database do the following:

in AD create two domain local groups in users with the following names:

[cc lang=”dos”]SQLServer2005MSFTEUser$$MICROSOFT##SSEE

SQLServer2005MSSQLUser$$MICROSOFT##SSEE[/cc]

Make sure the NETWORK account has full rights on the root drive where the WSUS database is.
run the installer now.

Yeah pretty dam simple and logic. Thanks MS

The error received when the installation fails:

Error 0x80070643: Fatal error during installation -> wow how generic is that?

what Microsoft tell you to do: http://support.microsoft.com/kb/920660