I struggled with this for days. Here is what was happening and what I did that worked.
faultykeyboard.log listed 24 entries of the form kb*.kbd
I searched and no such files exist on my computer.
By running regedit and looking I found 24 abnormal looking subkeys matching the list in:
HKEY_LOCAL_MACHINE/SYSTEM/CurrentControlSet/Control/Keyboard Layouts
After carefully reviewing the potential for damage I discovered that the operating system automatically restores this section of the registery if a boot failure occurs.
I then boldly deleted all subkeys of the type *.kbd from the registry. I deleted faultykeyboard.log. I rebooted then ran the update KB2686509 and it installed and rebooted the computer.
The problem is gone. Everything works.
