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Windows internal database is selected by default for WSUS installs (not to be confused with WID connectivity option) - You must unselect it before you get to the WSUS features section otherwise server manager WSUS install will spit out that error i screenshotted. It actually installed regardless of the error but WSUS service didn't start properly, i've spent three days of rabbit hole chasing to rectify it as opposed to starting again from scratch for the third time, this included a deep dive into IIS and configuration modifications into the WSUSAppPool, but finally got to this stage now without error