After a clean install of WSUS 3.0sp1 (including installing several pre-reqs) the application log started getting 'selfupdate tree not working' errors.  I searched the web and found a KB article (http://support.microsoft.com/kb/920659) as well as many forum postings describing similar problems.  Many users think there is a bug in the install.  However, Microsoft does not confirm this.  The error condition can take many forms.  In my situation, I was using the default IIS website.  The 'selfupdate' virtual folder was not created, so I created it, mapping to the actual folder, and then corrected permissions for the local IUSR acct. After restarting the website, I immediately got a 'selfupdate' success entry in the log and PCs started checking in.