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I am new to wsusoffline and had problems to make it work after a clean install of windows 7. After attempting many things here is the answer. The problem is within the system partition. You need to delete it when you install windows. If you are using a windows 7 disk to install, once you get to the point in the installation that you can choose which partition to install windows on delete all partitions. You will be left with one partition which will show the full size of your hard drive and it will say the space is unallocated. Not to worry , click on install and windows will create new partitions ...a new system partition and C drive. Now wsusoffline works like a charm again. Windows 10 is also have a lot of problems with windows updates with the system reserve partition too. With some installs the partition size is carried over from windows 7 at 100 mb and fills up and will not update any more . The system reserve partition needs to be 500 mb to work properly on windows 10. To correct this you need to use a disk partition tool to change the size...many freeware ones available. Hope this helps someone.

You can remove all partitions and create a new partition using shift-F10 and running diskpart. This allows the installation of W7 onto a single partition - no 100mb reserved system partition is created. I am noticing that WU is no longer reliable in the past month or so, though I have used this method for over six months.