There is a Registry Hack provided by The How-To Geek on how to disable this here:
Stop Windows Update from Hijacking the Sleep/Shutdown Button
Add a 32-bit DWORD value called
NoAUAsDefaultShutdownOption
toHKEY_CURRENT_USER\Software\Policies\Microsoft\Windows\WindowsUpdate\AU
with a value of 1. No reboot should be necessary.
You can apply it manually or download the registry fileregistry file which enables and disables this feature. I deploy it to all Windows 7 machines I own and it works beautifully.