This fixed the problem for me so I thought I would blog it (saves me remembering it) and lets anyone else fix the problem themselves.
To completely solve “Generic Host Process for Win32 Services” problem you should:
1) Scan your PC for the following viruses: CashToolbar Downloader-MY, System1060, CoolWebSearch Svchost32, ADCLICK-AG, ADCLICK-AX, ADUYO-A, AGENT-V, AGOBOT-KL, AUTOTROJ-C.
2) Go to Windows Automatic Updates properties (right-click on My Computer, then click on Properties and switch to Automatic Updates tab).
3) Choose “Turn Off Automatic Updates”, click OK and reboot your PC.
4) Manually update Windows using “Windows Update” shortcut in the start menu.
5) Turn automatic updates on.
6) If your problem is not solved on this step, uninstall old Hewlett-Packard printer and scanner drivers (if any) and download new drivers from the manufactures web site.
7) If your problem is not solved on this step, use the following command to show all svchost.exe instances and associated services or libraries:
tasklist /svc /fi “imagename eq svchost.exe”
Then search for each of services and libraries shown in that list in the Internet to find out whether the entry is malicious or not. In case you find malicious entry, use msconfig.exe utility to disable the appropriate service entry.
This is long but effective way of Generic Host Process or svchosts.exe repair.