Hello,
The servicing stack and TrustedInstaller components are very likely damaged. The least risky fix is an in-place repair of Windows 10 using official media while keeping your apps and files.
Do this on the affected PC, signed in with an administrator account.
Back up important files just in case and ensure at least 20 GB free on C:. If you use third-party antivirus, temporarily uninstall or disable it. Download the official Windows 10 Media Creation Tool from Microsoft. Run it and choose Upgrade this PC now.
If you prefer an ISO, choose Create installation media for another PC, make sure language, edition and architecture match your current Windows, then mount the ISO in File Explorer and run setup.exe from inside Windows.
When Setup asks Get updates, drivers and optional features, choose Not right now so the repair does not depend on Windows Update. Accept the license, confirm that Keep personal files and apps is selected on the Ready to install screen, then start the install. Expect several restarts. If prompted for a key, choose I do not have a product key. Your existing digital license will reactivate automatically after the repair.
When the repair completes, open an elevated Command Prompt and run:
DISM /Online /Cleanup-Image /RestoreHealth
sfc /scannow
Restart once more and try Windows Update again. Tell me if something goes wrong.