According to Microsoft in a post at the official Microsoft Update Team blog, the explanation for the snafu is as follows:

Well, the SSU has special code to check whether there are any pending reboots or other updates to install. If it sees either of these circumstances, it prevents the install from starting. During our investigation, we discovered that there were a few unknown and rare events during the middle of the installation of the update that could cause the update to think it needed a reboot to complete the installation. If this happened, the system entered a repeating reboot loop.

To address this problem for people who have not already installed the SSU, we are releasing a fix tomorrow which will install prior to the SP1 Servicing Stack Update. This pre-SSU update helps to ensure a smooth install of the SSU by working to prevent the system from rebooting during the SP1 SSU installation. We also made additional changes to the SSU installer code, so that it checks for and requires the pre-SSU (KB949939) before it will install.

Unknown and rare events = we missed some edge cases.

If you use the standalone Windows Vista installer, you won't have to worry about either of these, as it will install the prerequisites for you. This only applies to those using Windows Update to install SP1.

While this is great news, it still doesn't fix the pressing need for some better way to find any prerequisite drivers that are needed in order to install SP1. As you may recall, if your drivers are too old (and thus problematic), Windows Update will not let you install SP1. And finding updated drivers, as I previously wrote, and even figuring out which drivers are the problem, isn't that easy, for most end users.

Because of potential driver issues, even if you have downloaded the standalone installer for Windows Vista SP1, I recommend you use Windows Update to determine if you have a driver problem. As I wrote, it won't tell you what the problem is, but it will at least let you know you have a problem. Then the detective work starts.

Source: By Tech Ex