A software update hosing your OS is pretty bad. It's happened to all of us us at one point or another, though, and frustrations aside we get over it. A software updating denying you access to hardware, however, is something entirely different - and that's exactly what Microsoft is facing right now. It seems that a recent update to Vista is causing problems with USB devices, including USB mice and keyboards. The problem, it seems, will result in these devices no longer functioning, making it pretty difficult to implement any fixes or use the machine at all if you rely on USB input.
The update was for the Windows Defender package, and currently Microsoft has no fix available for it. In the meantime, if you are struck by this problem, your only real recourse is to use a PS/2 device - or remove the update and keep it off your system.