I checked my startup items folder - nothing there. Created a new account then opened up software update...same problem.
Have you tried disconnecting your peripherals and, or booting up in safe mode?
Mac OS X: Starting up in Safe Mode
Learn how to start up Mac OS X 10.2 or later in Safe Mode.
To start up into Safe Mode (to "Safe Boot"), do this:
Be sure the computer is shut down.
Press the power button.
Immediately after you hear the startup tone, press and hold the Shift key.
Tip: The Shift key should be held as soon as possible after the startup tone but not before.
Release the Shift key when you see the gray Apple and progress indicator (looks like a spinning gear).
During the startup in Mac OS X 10.2 through 10.3.9, you will see "Safe Boot" on the Mac OS X startup screen.
During the startup in Mac OS X 10.4 or later, you will see "Safe Boot" on the login window, which appears even if you normally log in automatically.
To leave Safe Mode in any version of Mac OS X, restart the computer normally, without holding any keys during startup.
Mac OS X: How to troubleshoot a software issue
Learn ways to troubleshoot software issues.
Is it a software or hardware issue?
You may not be able to determine this with certainty before troubleshooting. Troubleshoot software before hardware unless the issue prevents any software troubleshooting. See Mac OS X Troubleshooting: How to Isolate an Issue for more information.
Where does the issue occur?
A. If the issue occurs in one application only
For example, one application does not open or unexpectedly quits.
Mac OS X 10.4 or later: Mac OS X 10.4 or later can help with applications that unexpectedly quit by offering to open the application with default settings. If this doesn't help, skip to "Drag the application to the Trash and reinstall it if the issue persists..." below.
Make sure you are using the latest version of the software. Check with the manufacturer if the product is published by a third-party.
If the issue only occurs while using a specific document, try creating a new document or replacing your document with a backup. Your document may be damaged. If possible, try testing with either a new file or a known-good file.
Drag any preference files associated with the application from your Preferences folder to the desktop, and try again. If you do not know where the application stores its preference files, look in these locations:
In the Library folder that is in your home directory. Look for documents or ".plist" files named after the application.
In folders named after the application.
In the Preferences, Caches and Application Support folders in ~/Library and /Library .
Tip: If you are unable to identify a specific preference file, drag the entire ~/Library/Preferences folder to your desktop, then log out or restart. You may need to reconfigure some system settings.
Tip: If removing preference files resolves the issue, choose the application's Preferences menu command to restore settings, one or a few at a time, to help isolate the cause if the issue returns.
Drag the application to the Trash and reinstall it if the issue persists. Some Apple applications that may have been included with your computer can be reinstalled by using the Install, Restore, or iLife disc that came with the computer. See this document for Mac OS X 10.4 information.
B. If the issue occurs in Mac OS X or in various applications
For example, no applications can be opened.
Tip: If the issue began right after you a Mac OS X reinstallation (excluding erase-installation), see Applications don't work after reinstalling Mac OS X.
The first and easiest test to try is to see if the issue affects another user account. Each user has customized preferences and other items stored in her home directory.
From the Apple menu, choose System Preferences.
From the View menu, choose Users (Mac OS X 10.2 or earlier) or Accounts (Mac OS X 10.3 or later).
Click New User (Mac OS X 10.2 or earlier), or "+" (Mac OS X 10.3 or later).
Give the new user a name and short name.
For Mac OS X 10.3.x or earlier, click the Password tab, and give the user a password.
For Mac OS X 10.3 or earlier, click Security.
Select the checkbox for "Allow user to administer this computer". This makes the user an administrator user.
Click OK or quit System Preferences.
Log out of Mac OS X and log back in as the new administrator user.
If this resolves the issue, there may be an issue with a preference file in the home directory of the original user account. Start up from the original account and refer to section II-A, step 3 above for troubleshooting information.
For Mac OS X 10.2 or later, start up in Safe Mode, see "Mac OS X: How to Start Up in Safe Mode". If the issue does not occur, there may be an issue with a login item or kext file. Refer to "Mac OS X: Troubleshooting a Startup Issue" for troubleshooting suggestions.
If the issue does not appear to be related to preferences, a login item, or a kext file, and persists in Safe Mode, there may be an issue with a cache file in your home folder:
Go to ~/Library
Drag the Caches folder to the desktop.
Attempt to reproduce the issue.
If issue is resolved, drag the Caches folder to the Trash.
If issue persists, go to /Library.
Drag the Caches folder to the desktop.
Attempt to reproduce the issue.
If issue is resolved, drag the Caches folder to the Trash.
If issue persists, go to step 4.
Tip: The Caches folder is similar to the Preference folder in that each time an application is opened, a new file is written. It is not necessary to troubleshoot these files.
If the issue persists, there may be an issue with a third-party font file in your home folder:
Tip: With Mac OS X 10.3 or later, you can enable and disable fonts using Font Book instead of the steps below. See "Turning a Font Off or On".
Go to ~/Library
Drag the Fonts folder to the desktop.
Log out and back in, or restart.
Attempt to reproduce the issue.
If issue no longer occurs, reinstall any third-party fonts. Delete the former Fonts folder when finished, then stop here.
If the issue persists, go to /Library.
Drag the Fonts folder to the desktop.
Log out and back in, or restart.
Attempt to reproduce the issue.
If issue no longer occurs, reinstall any third-party fonts. Delete the former Fonts folder when finished.
C. If the issue persists
