The first thing is to confirm that the machine is, in fact, configured to point ot the WSUS server:
I would run RSOP.MSC on that remote machine, and go to Computer Configuration -> Administrative Templates -> Windows Components -> Windows Update to check the settings there. If there is a group policy defined to point it to the local WSUS Server ("Specify Intranet Microsoft Update Service Location"), you should be able to see the GPO name from where it is getting that setting; if it is wrong you should be able to go fix it.
If it is not there, then I believe that would indicate there is not a group policy currently setting it.
In that case, rather than edit the registry directly, I would run GPEDIT.MSC on the remote machine and browse down to it to set the local group policy to both "configure automatic updates" (option 3 or option 4, typically) and also to "Specify intranet Microsoft update service location".
Couple of notes:
- If your WSUS server is using port 8530, you'll need to specify it on the line in the "specify intranet..." setting (e.g. http://mywsusbox:8530 instead of just http://mywsusbox )
- If you want to deploy 3rd party updates to that remote machine, you'll also want to enable the "allow signed updates from an intranet microsoft update service location" as well.
The second thing is that you may want to make sure that WSUS is patched up to the latest version.
Are there any other errors in that remote machine's WINDOWSUPDATE.LOG file?