Microsoft is aware of this problem per http://answers.microsoft.com/en-us/windows/forum/windows_10-update/reset-this-pc-with-the-remove-everything-option/3313d6e5-bdf0-4756-96f8-c198651cb717
- You are running Windows 10 version 1607 and have the Get Office app installed (version 17.7909.7600 or later). The app may have been preinstalled with the PC or installed via the Store.
- You perform “Reset this PC” with the “Remove everything” option.
- During the reset, you receive a warning that some of your files cannot be removed.
- The reset completes successfully, however some of the factory settings configured by the PC manufacturer might not be restored correctly.
- If you then perform “Reset this PC” with the “Remove everything” option again, the reset operation fails.
FWIW, one of last week's Patch Tuesday Updates failed and I was advised to use the "Reset this PC" from Brink at Ten Forums. It worked a treat! http://www.tenforums.com/tutorials/24742-reset-windows-update-windows-10-a.html