It happened to me twice on a new installation of Windows XP. In the first time I reinstalled Windows to fix it. On the second time I researched a bit and found the problem to be the installation of .NET 4.
The only way I found to fix it was to uninstall .NET 4 completely. Repair of .NET 4 or of Windows update did not help.
As far as I know, if you use Windows XP you have to live without .NET 4 or without Windows Update. If you use newer versions of Windows you can try installing .NET 4.5 since it’s a replacement of .NET 4. Unfortunately Windows XP is not supported by .NET 4.5.
I would love to know if you have a solution for Windows XP users.
Update: I have asked the quesion on superuser.com and some time after trying to solve the problem it started working. I don’t know what helped or if it is something from this page but you can try.