I had this exact same problem. FWIW, I strongly suspect it is manifested by
setting the service "Automatic Updates" to "manual start".
I'm kinda piecing this together after-the-fact, but here is the history:
I had recently loaded W2k sp4. Later I set the "Automatic Updates" service
at manual start. Shortly after, I started seeing the "svchost.exe" errors
and the same symptoms described by you.
I suspected (in order): norton antivirus, msn messanger, my automatic backup
software.
I disabled antivirus, but it had no effect.
I re-enabled "Automatic Updates" by setting the service startup to
"Automatic". I have not seen the "svchost.exe" problem since.
I believe that registry settings for "Automatic Updates" are still present
and probably screwing things up. I see no way to uninstall "Automatic
Updates".
-marty nicholson