Hi sbrown51265, this is a sophisticated failure—you've correctly identified that the update engine is 'stubbornly' trying to initialize the hypervisor stack even when the host hardware doesn't support it (lack of VMX).

Since there is no 'official' documented switch to skip virtualization-dependent packages during the offline migration phase, here is how you can try to force the update through:

Option 1: The 'Bypass' Registry Method: Before launching the installer/update, use the Registry Editor to set HKEY_LOCAL_MACHINE\SYSTEM\CurrentControlSet\Control\DeviceGuard\Scenarios\HypervisorEnforcedCodeIntegrity to Enabled=0. Sometimes this prevents the update engine from asserting the VBS requirement during the staging phase.

Option 2: The 'DISM' approach: Instead of using the Windows Update GUI, try downloading the .msu or .cab file for the update and deploying it via DISM from an elevated command prompt (dism /online /add-package /packagepath:C:\path\to\update.cab). DISM often handles the 'offline' migration logic more gracefully than the standard Update Orchestrator.

Option 3: The 'Virtualization' override: If you have access to the BIOS, even if your CPU lacks VMX, check if there is a 'Virtualization Technology' toggle. Sometimes flipping it to 'Enabled' (even if the CPU is incompatible) satisfies the installer's 'check'—it will crash later, but it might get you past the 38% update hurdle.

Given your diagnostic logs, I would focus on the DISM deployment method—it is the most likely way to bypass the 'pre-flight' checks that are locking you up.