It did the same sort of thing with nVidia prior to SP1.  It was when the 260 drivers came out I believe.  A friend on another forum posted a 'fix' file.

So let me get this straight, Microsoft expect us to believe that one little irrelevant problem manages to be such an intrigal part of the whole OP update that the whole process fails??

The problem here is not Microsoft but the Driver vendors.  If you uninstall their drivers they ususally left crap behind.  This could cause problems on newer installatons of the drivers.  People developed driver cleaner programs to reqally clean the driver installations.  The usually needed to be check against new driver releases to make sure the vendor did not add or delete any files.

Win 7 is born and with trying to make things easier certain files were added to the OS for people to boot up with a decent display and then install full drivers from there.  There are a basic set of drivers for AMD and nVidia in every OS install and if those are missing can cause the system not to boot and a repair will be required.  Driver removers started by doing wildcard searches for specific patterns in specific directories.  Those rules no longer apply and they not have to be more specific in what they will remove.  It has even caused nVidia to add a clean install option to their newest drivers which should have been the responsibility of AMD and nVidia from thr start.

It's not 'gray' at all.  SP1 is an add-on ...an updater, not a repairer.  If it finds an error in the OS to which it is being applied the only responsible option is for it to halt until such error is corrected so as not to potentially exacerbate it [the error].

The 'origin' of the fault is with the Driver Company, not MS, and MS is not THEIR 'support' department.

They [MS] are less of a 'monopoly' than Apple is within their own machines/systems.  Were they a 'monopoly' they would both restrict Vid card choice to ONE and write all the drivers themselves.

So....no 'obligation' at all.

The sort of 'repairs' that a MS SP are likely to deal with are the ones MS has found as flaws/failings in the OS release, not necessarily something a third party programmer may have introduced.... simply because there are way too many diverse and creative ways that they [the third party programmers] AND the individual user may have screwed up the OS.

Afterall.... how many LiteSTEP users have seen the message "OS not found. You must re-install Windows."?  [I did once...but I think I got away with it]...