For all those having 'download failed' issues, don't give full permission to 'Everyone' on the share (because this would allow anyone to mess with definition updates on the share, a potential security risk), rather do the following:
Open up the C:\sources share permissions and add:
SMSSERVER\Administrators with full permission
SMSSERVER\WSUS Administrators with full permission
Alternatively put your package in the auto generated 'c:\sources\WSUS\UpdateServicesPackages' instead of 'c:\sources\WSUS\updates\Endpoint' share, which has the proper permissions automatically generated for it from when you first setup the WSUS update point.