Microsoft has pulled update KB937287, one of three updates that must be installed before installing Vista Service Pack 1.  In a small number of cases, this update has been reported to cause either a major OS crash or leave the OS stuck in an endless cycle of rebooting.  In this c|net report, one user reported losing all of its files and programs as a result of having to reformat the hard disk, corrupted by trying to install this update.  This user also lost its Vista Ultimate installer that was purchased online and downloaded to this drive.  Microsoft said it needs some time to investigate the bug before it can make this update available.

Service Pack 1 was just released recently, but as it has only been made available to volume license customers, Technet and MSDN developer program members, most users would be unaffected, as the general public release was not due until around mid-March.  According to Vista program manager Nick White, this latest problem "affects a small number of customers in unique circumstances." 

On the other hand, Vista SP1 has already delayed for the general public until certain software driver compatibility issues could be resolved.  While Microsoft plans to make SP1 available as an automatic update mid-April, PCs that contain known incompatible drives will be prevented from receiving the update.

So far, there are no reports we can see of anyone having these issues after they have successfully applied Vista SP1.  However, for those who have managed to obtain the update and are eager to install it, we would advise making a complete system backup prior to installation of this KB937287 update, not to mention the service pack itself.