You know...I have the answer for you. It really just came to me out of nowhere while away from the pc and not even thinking of it consciously.
First, it dawned on me that you are using a pirated Windows version but then I thought that it wouldn't make too much sense since 8 is free. The clue to me is that your machine restarts every 2 hours. So why is your machine doing that if you are using legit Windows?
The answer: Set your time and date to be correct in bios. Reboot and enjoy Windows Update working again.