A cloud server on Azure always seemed to be lagging. It's only got one CPU and limited memory, but the CPU usage is always 100%, and the desktop is barely usable.

Setting the task in task manager to low priority brings some responsiveness back to the server, but it seems worrying that the update service never 'completes' its task.

The 'fix' that seems to have worked for now is to stop the services "Windows Update" and "Background Intelligent Transfer Service"

This can be done from an administrative command line:

net stop wuauserv
net stop bits

Windows Update might not stop in a timely manner though and may need killing from the task manager.

Close Windows update settings before doing this, otherwise it will immediately bring the service back up.

Then try renaming C:\Windows\SoftwareDistribution. On my machine, there seems to be a pretty big database file C:\Windows\SoftwareDistribution\DataStore\DataStore.edb, and the Download folder totalled 4GB. This is probably the root cause

Renaming SoftwareDistribution and starting the services back up allows Windows Update to create a new folder and database file, which is small. The CPU usage problem has gone for now and the poor small server can now do its job.

rename C:\Windows\SoftwareDistribution SoftwareDistribution_Backup
net start bits
net start wuauserv

This is at least the second time I've done something like that for Windows, maybe the third. It's a shame it can't sort itself out and I bet there are tens of thousands of PCs and servers out there that are just burning energy unnecessarily.