That's all well and good, but it's really unlikely that they'd have "issues" regarding content like icons or themes, so chances are that this is mostly binaries regarding actual dlls, libraries, executables, runtime environments, IL files, and so on. There's no reason to expect all those things to involve huge amounts of data. Even if you assume that you've got an archive, the unpacked data, the original data, a backup of the original, the CLR and bytecode and JIT-ted binaries of whatever it is that's currently executing, 7 GB is still a lot.
If SP1 was 75% full of theme updates and new wallpapers and a bunch of advertisement videos and all sorts of "we suggest you buy this Microsoft product -- to aid you in this, we've found your credit card number and we're now placing orders for this software because you're too lazy to do it yourself" kinds of things, then I'd say so many GB isn't that unusual. Of course, if that was the case, there would be little to no reason for there to be a size difference between 32 and 64-bit machines (unless a 64-bit machine owner is required to buy additional stuff and view additional ads).
About the only way it would look halfway acceptable is if the process involves making a complete backup of the entire working OS installation, which is where the install takes place, and then when the install is actually complete, you remove the old copy of the OS and the new temp install folder replaces it. That could probably account for 6 out of 7 GB easily. When you think about it, this isn't entirely impossible, but it's not really the first thing you'd think of. If you were writing an OS update patch yourself, I doubt you'd do it this way unless you knew there was a high risk of failure in the course of the update.
In any case, it is true that the fact that it's Microsoft is the automatic point of concern since they don't exactly have a history of creating bug-free software. Everything we might actually like that they make is still horribly buggy and annoying, and simply accepted as the way things are.