Ran into almost the same exact issue. The problem is VMWare removed the UPdate 1 patch from their download sites used by UpdateManager, but your UpdateManager server still has it in its list of available patches. When you go to remediate, it attempts to download it, can't find it, and bombs.
To work around this, edit your patching baselines and exclude the Update 1 patch. I found I had to remove several non-critical patches dated 11/19/2009 as well (related to thsi update) to get remediation to work again.
To install the cum 1 patch now, you have to download it directly from VMWare's site and manually install on your ESX Hosts. Be sure to read the advisory on it too, since there is a nasty bug involved that may make your ESX host not recover after the installation.
Hope this helps.