Windows Update when Group Policy Forbids

I was able to get around by going to this location in the registry:

HKCU\Software\Microsoft\Windows\CurrentVersion\Policies\System

Inside, there's a key called Wallpaper. I deleted it and re-set the desktop background, and it worked.

You'll have to do that every time you log on though, as group policy refreshes itself. (It can also be set to refresh automatically.)

As far as I can tell, the Group Policy Objects branch is only a cache of the active GPOs. Windows actually checks this Registry location for computer policy settings:

HKLM\SOFTWARE\Policies

For the Prevent installation of devices that match any of these Device IDs setting, Group Policy uses this key:

HKLM\Software\Policies\Microsoft\Windows\DeviceInstall\Restrictions

The DenyDeviceIDs DWORD is set to 1 when the policy is Enabled. The DenyDeviceIDsRetroactive DWORD corresponds to the Also apply to matching devices that are already installed checkbox: 1 for checked, 0 for not.

The restricted entries are kept in a subkey of Restrictions that also is named DenyDeviceIDs. One value on that key is one restriction. Each value's name should be the same as its data.

Tip: I found this information using the Element Inspector tool in my own open-source application, Policy Plus.

You'll need to reboot for the changes to take effect.

Note that even if you set all the Registry settings exactly right, it's possible that Home editions might not respect them. Most Group Policy settings work just fine on all editions, but there are a few that don't; the components that make use of them might not be there on Home. If you find that these settings don't work, you'll need to upgrade to Pro.