These 3 combination for whatever reason cripples Windows update. This issue is still unsolved for me due to lack of any Mcafee logs that can point to the signature that is causing it. I would disable IPS every patch Tuesday to get the updates as a workaround for the time being. Here are the symptoms.
1. Win7 + McafeeHIPS IPS on + VMware View agent = Windows Update not working
2. WinXP + McafeeHIPS IPS on + VMware View agent = Windows Update no issue (weird)
3. Win7 + McafeeHIPS IPS on = Windows Update no issue
4. Win7 + VMware View Agent = Windows Update no issue
5. Win7 + McafeeHIPS IPS on + VMware View agent = When IPS is disabled then re-enabled crashes and restarts the VM.
The hard part is not have a clear log that points the the root cause. Another issue is whether to call Mcafee or the VMware View team. This is going to require more time to be diagnose properly in the near future.