Going back to the original question, this happens DURING THE FIRST UPDATE only. The official explanation from NAI is that the DAT files that were originally included in VSE 7.0 is not supported by the 4.2.60 engine. Thus, when you first run the update, it will fail to update the engine, but will update the DAT files. Once you run another update, then the engine will be updated.
Seems like a trivial thing, but no harm running the update again to ensure the engine gets updated.
AVChap
... been there, done that, made that mistake too, see where I am now.