To repair WSUS 3 on a SBS 2008 box is actually relatively easy (at least as compared to ripping out SBS 2003 monitoring and putting it back)
Repair Windows Server Update Services:
Make a c:\wsus and type in the commands to run the install
Check that the folders were installed
Once WSUS is reinstalled put back in the products (ALL products)
Select the classifications (I do all but drivers)
Ensure you do languages section (I missed that in the instructions the first time)
Manually type back in the categories
Ensure that the group policy settings are back in place (most of the time they are where they should be already)
And voila… green button not gray button again
If you can’t get it installed, dig out the log files.
First uncheck the button in folder view so that hidden files are seen (I ALWAYS DO THIS) and while you are there untick the “hide known file extensions”.
Under the c:\users\name of your admin\appdata\local\temp look for the WSUS setup logs
Review them and see what they say. If something looks funky, holler!