Recently I had problems using Windows Update properly, where Windows Update would hang on "Preparing to install..." rather than actually downloading and installing the updates promptly.

The problem lies within the GWX ("Get Windows 10") and Telemetry updates.

First, I removed and hid these updates from Windows Update:

===Remove GWX Updates===

===Remove or Fix other preparatory Updates===
KB3050267 (*Superseded, No Longer Offered)
KB3022345 (*Superseded, No Longer Offered)
KB3068708 (also a telemetry update)

===Remove other Telemetry Updates===

(Note: You can search for installed Windows Updates on the search box on the ribbon in "Installed Updates"...)

Next, I restored the proper telemetry files prior to these updates.
Since I am using a 64-bit machine, I downloaded SFCFix for x64 from The Tech Cookbook. (A download for x86 systems is also located there, with instructions...) I extracted the zip archive (using 7-Zip) into:
"C:\Fix\SFCFix\" and ran the following from a command prompt (with Administrator Privileges):

dism.exe /online /cleanup-image /restorehealth /source:c:\Fix\SFCFix /LimitAccess
(This might take a while, depending on the last time corruption was fixed...)

A reboot is absolutely necessary whenever DISM is used to alter the file system...

After this, I still ran the Windows Update Diagnostic to fix residual problems. Microsoft doesn't wan to fix itself, for some reason...

The problem is now solved, and Windows Update functions as before (including downloading Windows Defender Definitions and other Microsoft Updates properly) without the "Preparing to install..." delay. The obvuscative Microsoft telemetry problem is also a non-issue now.