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All appears well. Clients started reporting ater the client fix.
Thank you all contributors.

I removed WSUS3, deleted c:\program files\update sevices ,
and deleted all clientws.DLL

clientws.DLL ver.2 was in deep subfolder of:
C:\WINDOWS\Microsoft.NET\Framework\v2.0.50727\Temporary...

I while back I forced out WSUS 2 but the reference is not in the registry.
is it in a .net config file?
I checked the file, and clientws.DLL is ver. 2 dated 5/26/2006!
It must have been...