I think the Windows update message is spurious, and the reason this is not working is due to your primary graphics card:
Graphics: XGI Volari Z7 v1.10.01h_Dell (XGI)
Graphics Driver: 6.14.10.1100 Dated 2008-05-15
This should be a high end Intel, AMD or NVIDIA graphics card for WMS. DisplayLink don't support this graphics card and is not a WDDM driver (which we require). See the recommendations here:
http://www.displaylink.com/zero_client/wmshowto.php
Wim