With "windows update" Win 10 started installing the 1709 from 1703 installed and it is doing it one by one in the loop reporting the installation error in the update history.
It started in fusion 8.5.9 and after the upgrade to fusion 10.0.1 the problem is exactly the same...
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This is the solution from VMWARE support which worked:
"Please power off the VM. Go to settings > hard disk > advanced options> and choose pre allocated disk space. > Start the vm."
Worked for me too!