Resolution - although it's not related to SEP, I want to share what worked for us. Don't like threads that don't post their resolution.
Apparently, it's related to the Microsoft Windows Update site but not sure exactly how. We were getting generic "try later" communications errors. We went through MS troubleshooting doc. One suggestion was to set Windows Update to retrieve updates from the Microsoft Update site instead of the Windows Update site.
We used the opt-in for Microsoft Update (in Win 7 it's located mid-way down on the Windows Update page - "Get updates for other Microsoft products".
We set the client to get updates from Microsoft update and it now works. Don't know why Windows Update was having problems.
Lastly, be aware that the opt-in for Microsoft Update will set your update preferences to "Automatically check and install". You can stop Windows Update while it's checking for updates and set your preferences to something else if desired.
We're a small shop and don't use WSUS.