Softpedia published shorter version (also from MS support forums)
The workaround What you need to do is to fire up File Explorer and delete the entire folder at the following location (administrator privileges are needed, so make sure you are logged in with an admin account):
C: > Windows > System32 > Tasks > Microsoft > XblGameSave
After that, launch the Registry Editor by typing regedit.exe in the Start menu and delete the following registry key – once again, administrator privileges are needed to do this:
HKEY_LOCAL_MACHINE > SOFTWARE > Microsoft > WindowsNT > CurrentVersion > Schedule > TaskCache > Tree > Microsoft > XblGameSave
According to users who have already tried this, all you need to do next is to launch Windows Update once again and try to download and install the cumulative update. Everything should be running correctly and the update should install just fine on all Windows 10 devices.
Yep, the workaround worked for me too..
It took a random guy to find the error, that's how much MS care about this. All the telemetry and people working and they didn't do shit, they let us installing this broken update..
I'd like to say that in our family home we have 5 PCs, 1 desktop and 4 laps.
From these 5, only 2 were fine with the original MS KB3194496.
Other 2 I got success using MCTool ISO download and setting Get Important Updates in the beggining of the installation.
The last one I used the Softpedia workaround.
One thing I will mention is, I have HD Sentinel Pro on this system, set to start with Windows. That installation was corrupted by the failed update attempts of KB3194496. After fixing that installation, I un-ticked the box for it to start with Windows, performed the changes listed in neowin's page, and the update went through without a hitch.
Shouldn't have to do this MS.
This update failed 5 times on me and deleting xboxlive-related files and registry entries solved it!
And now y'all know why I run a lean, clean mochine!
OK, OK, OK! StarFerret just told me she wants to run what she wants to and an update should just work! Sigh . . . I guess she's right.