SCCM/MDT Reference Image Capture - Install Software Updates Time out - Native Mode

Ok, so before I throw in the Towel and create my Reference Image in MDT 2012 (which I know is the preferred way for the SETUP and Deploy MVP's). I thought i'd give it one last try.
 
 I've done a reference capture for Windows 7 in Mixed Mode environments successfully numerous times. I am in a new Environment at a Firm that is in Native Mode. SCCM 2007 R3, One Central Primary Site, and many Secondary Sites. All Servers are W2K8 R2 sp1. My Windows 7 Reference Image capture does not Install Patches at the 'install Software Updates' step (It times out). Here is what I have done so far:
 
1)In Site Mode Properties: I have checked off 'Allow HTTP Communication for roaming and site assignment'. Deselected Enable CRL checking on clients. (This allowed me to do the next step)
 
2)Changed the IISSSLSTATE = 95 on the MobileClient.tcf file in \BIN\i386\
 
3)I recreated my Boot Images
 
4) Added Multiple 'Install Software Updates' steps followed by a reboot. (It is a big W7 post SP1 patch pkg) (The SMSTS.log says the Request for Updates Timed out. This led me to try this step first before realizing we were in native mode)
 
5)Double-checked my Patch Property for 'Setup and Configure Configmgr Client' step. I have my SMSSLP=<Server> specified and I am running one hotfix, 2509007 which is the hotfix for SUP.
 
The Distrubtion point and Child Software update point are located in one of the local secondary sites. Which is working fine when you already on the Domain but not in the reference image workgroup scenario. I even tried running a script before the Install Software Updates step to specify the SUP and trigger a scan, no good. I've seen different posts and articles of people getting this to work in Native Mode. I've tried a Combination of them All. NO luck!
 
Any ideas or suggestions would be very much appreciated.

We have not tried to go down that route as we too are native mode (and internet facing).  I use MDT to create my reference gold images.  I feel that it keeps the 'image' much cleaner than using OSD to do it.  There is no cert requirement and no possibility of a corrupt configmgr client install.
 
My thoughts for you are to throw the towel in and use MDT.  It has not failed me yet.

Good Points, Thanks Roger.
I initially held off on MDT for my Ref image because I didnt have a WSUS server handy. But I was able to get a Box. So I will just dedicate it to MDT and Hyper-V.

Happy to help :)