Create a new ISO with
New-OSBMediaISO and install Windows 7 on a clean Virtual Machine
Here is what Windows 7 x64 SP1 7601 looks like without running through OSBuilder
After using OSBuilder, Windows Update looks much better. The remaining updates cannot be added through Offline Servicing. Windows 7 Service Pack 1 is just a check to make sure that it is installed properly, as you can see from the 9.1MB size.