I think that Windows Update has some provision for third-party plugins, though I don't recall the details. If you have a programmer handy he or she might be able to do something in this area. I don't think there's anything you can do from the WSUS server itself.
Another approach would be to use Process Monitor or a similar tool to figure out what it is the the
msiexec /regserver is fixing (perhaps a registry setting?) and then write a service to monitor that key (or whatever) and kick off the fix as soon as it goes wrong. This information might also help you solve the actual problem. If nothing else, you could try changing the ACLs on the registry key in question to prevent the system from changing it.
Another approach would be to reconfigure the clients to not install updates automatically, and use a script to do the update installs. That way, you could put the
/regserver at the start of the script. You might find this script handy as a starting point.
If you want to try to troubleshoot the underlying issue, I'd start by putting a clean install on a test computer and adding it to the domain under a separate OU with no group policy. If there are group policy objects linked to the top of the domain you can use the "Block inheritance" option on the OU to prevent them from being applied. If the problem doesn't occur in this setup, you can then link in your group policy objects one by one to identify the one that's causing trouble. Reinstall the test machine and apply an empty group policy object, then add the settings from the other GPO one by one to identify the specific setting. This sort of approach is slow but effective.