While my first priority was to recover the data from the laptop, i also looked into the actual machine recovery.
I was able to boot into Vista System Recovery Options from the Vista DVD, and chose System Restore. Amazingly, Vista was responsible enough to create restore points before installing the updates that sent it crashing.
So i chose the restore point before the installation of the updates, waited about 10 minutes, rebooted when the System Restore asked me to, and voila, a living and breathing Vista :)
Although i am an advocate of secure computing, it seems that in this case an automatic update windows update caused all the trouble. The user didn't even saw the installation, which added to the panic of a failing system and lost data.
With this respect, i would recommend to the users to consider changing the default Vista automatic update setting to notification when updates are available, and reviewing them before installation. This way the responsibility for having an up-to-date system is left on the user, but there is also a significant measure of control what stuff is installed onto your PC.
I hope that Microsoft will acknowledge the problems of the update and post a fix, so the confidence in their published updates can be returned.