Updated 5-Oct-2016: Well, that was fast. Microsoft released a fix-it script and an explanation. Details here: Microsoft releases fix for Windows 10 cumulative update issues
Those of us who routinely monitor Microsoft's support forums knew last week that something was wrong with the latest cumulative update to Windows 10. We learned yesterday that Microsoft has now acknowledged the issue and is working on a fix.
The problem occurs with Cumulative Update KB3194496, which was released for Windows 10 version 1607 on Sept. 29, 2016.
For most users running the latest public release of Windows (version 1607, also known as the Anniversary Update), this cumulative update completes successfully and brings the current build number to 14393.222.